[Trade Journal]
Publication: Verbatim Record of the Proceedings of the Temporary National Economic Committee
Washington , DC, United States
vol. 1, no. 8, p. 233-252, col. 1-3
VERBATIM RECORD
of the
Proceedings of the
TEMPORARY NATIONAL
ECONOMIC COMMITTEE
VOLUME 1
December 1, 1938 to January 20, 1939
CONTAINING
Economic Prologue
Automobile Patent Hearings
Glass Container Patent Hearings
Presentation on Patents by Department of Commerce
Published 1939 by
THE BUREAU OF NATIONAL AFFAIRS, INC.
WASHINGTON, D. C.
·
·
Seventh Day's Session
_____________________
VERBATIM RECORD
of the Proceedings of the
Temporary National Economic Committee
Vol. 1, No. 8 WASHINGTON, D. C. Dec. 13, 1938
TUESDAY, DECEMBER 13, 1938.
THE TEMPORARY NATIONAL ECONOMIC COMMITTEE MET AT 10:45 A. M. PURSUANT TO ADJOURNMENT ON MONDAY, DECEMBER 12, 1938, IN THE OLD CAUCUS ROOM, SENATE OFFICE BUILDING, SENATOR JOSEPH C. O'MAHONEY PRESIDING.
PRESENT: SENATOR O'MAHONEY OF WYOMING, CHAIRMAN; SENATOR WILLIAM E. BORAH OF IDAHO; SENATOR WILLIAM H. KING OF UTAH.
REPRESENTATIVE HATTON W. SUMNERS OF TEXAS, VICE CHAIRMAN.
DR. ISADOR LUBIN, COMMISSIONER OF LABOR STATISTICS, REPRESENTING THE DEPARTMENT OF LABOR.
MR. THURMAN W. ARNOLD, ASSISTANT ATTORNEY GENERAL, REPRESENTING THE DEPARTMENT OF JUSTICE.
MR. RICHARD C. PATTERSON, JR., ASSISTANT SECRETARY OF COMMERCE, REPRESENTING THE DEPARTMENT OF COMMERCE.
MR. EWIN L. DAVIS, COMMISSIONER, REPRESENTING THE FEDERAL TRADE COMMISSION.
ADMIRAL CHRISTIAN JOY PEOPLES, DIRECTOR OF PROCUREMENT DIVISION, REPRESENTING THE TREASURY DEPARTMENT.
MR. LEON HENDERSON, EXECUTIVE SECRETARY OF THE COMMITTEE.
COUNSEL: H. B. COX, (CHIEF COUNSEL); GEORGE W. WILLIAMS, JOSEPH BORKIN, FOWLER HAMILTON, ERNEST MEYERS, BENEDICT COTTONE, CHARLES L. TERREL, MONROE KARASIK, AND IRVING GLICKFELD.
The CHAIRMAN. The Committee will please come to order. Mr. Cox, are you ready to proceed?
Mr. COX. Yes. Our first witness this morning is Mr. Parham.
The CHAIRMAN. Before you begin, however, I should like to take this opportunity of making an announcement to the members of the Committee. Secretary Patterson, member of the Committee, representing the Department of Commerce, today suggested to me that the Department of Commerce would like to have the Committee assign later two or three days for the presentation by the Department of Commerce of testimony with respect to the general features of the patent law. That would be a presentation altogether independent from that which is now being made by the Department of Justice and would be intended primarily for the purpose of showing the sort of change in the patent law which the Bureau of Patents might be willing to recommend to Congress, and if there is no objection upon the part of the Committee the request of the Department of Commerce will be granted and a date for those hearings will be fixed later.
Representative SUMNERS. Mr. Chairman, will that come after we shall have concluded taking testimony with reference to patents?
The CHAIRMAN. That will come after we have concluded the presentation of the case by the Department of Justice.
Mr. ARNOLD. May I make this explanation, Mr. Congressman. We have been in close cooperation and consultation with the Department of Commerce, and for the purpose of orderly presentation there are two things which we have separated; one, the questions of the proper technical and procedural operation of the patent law, with which the Department of Justice is not charged, with which they are not particularly skilled, and our own hearing is with the restraints of trade aspect, and we are cooperating with the Department of Commerce in the other, but we thought in the interest of orderly presentation it would be better, to separate those two things.
REMEDIAL LEGISLATION
Representative SUMNERS. The only point I had in mind is whether it is a matter of bringing the existing law to the attention of the committee or whether it was a suggestion of remedial law. It seems to me that if it is going to make a suggestion toward remedial legislation, that ought to be toward the conclusion of the presentation with reference to patents.
Mr. ARNOLD. The date will have to be fixed.
The CHAIRMAN. That is what we had in mind.
Senator KING. I assume, in the announcement made, it is not intended to preclude persons who desire to present their views for or against the present patent situation?
The CHAIRMAN. Not at all.
Mr. COX. I think Mr. Parham has not yet been sworn.
The CHAIRMAN. Do you solemnly swear the testimony you are about to give in this proceeding shall be the truth, the whole truth, and nothing but the truth, so help you God?
Mr. PARHAM. I do.
Representative SUMNERS. Before you do that, at the conclusion of the session last evening I understood Mr. Smith was to be here.
Mr. COX. Well, I am sorry if I gave the impression that he was going to be here today. I did plan to have him back tomorrow possibly or the next day.
TESTIMONY OF SIDNEY F. PARHAM, PATENT ATTORNEY, HARTFORD EMPIRE COMPANY, HARTFORD,CONN.
Mr. COX. Will you give the reporter your name and address?
Mr. PARHAM. My name is Sidney F. Parham. I am a resident patent attorney of the Hartford-Empire Company, being chief assistant to Mr. R. D. Brown, the vice-president of that company in charge of patents.
Mr. COX. How long have you held that position?
Mr. PARHAM. I have been resident patent attorney since 1926.
Mr. COX. Did you do any work for the Company before that?
Mr. PARHAM. Yes, sir. Prior to that time I was engaged in patent law practice in Washington with Dorsey Company and spent a considerable portion of my time on work for the Hartford-Empire Company.
GLASS INDUSTRY PATENTS
Mr. COX . Mr. Parham, yesterday Mr. Smith testified that the Hartford-Empire Company held certain patents relating to methods for machines used in automatic feeding of glass by the gob method. Do you recall that?
Mr. PARHAM. Yes, sir.
Mr. COX. I ask you whether it would be possible to classify the patents in the sense that some of them are basic in character and others are on improvements or details.
Mr. PARHAM. It might be possible to classify them, but I am not prepared to give you an accurate classification at this time.
"PHASE CHANGE PATENT"
Mr. COX. Well, I will ask you about two specific patents. I refer to the one which is numbered 1,573,742. I think that is the so-called phase change patent.
Senator KING. What is that name.
Mr. COX. Phase change, p-h-a-s-e. I ask you about that patent. Will you describe that as a basic patent?
Mr. PARHAM. I would describe that patent as an exceedingly important patent but possibly not the basic patent in the gob-feeding art.
Mr. COX. Would you say the basic one was 1,655,391?
Mr. PARHAM. No, sir, I would not. I would say that is also an exceedingly important patent with broad control, yes.
Mr. COX. Of course, those have figured very largely in the litigation which your company has had.
Mr. PARHAM. That is true.
PATENT LITIGATION
Mr. COX. On the so-called "phase change," you sued the Nevison-Weiskoff Company at one time?
Mr. PARHAM. Yes, sir.
Mr. COX. And the Kearns-Gorsuch?
Mr. PARHAM. Yes, sir.
Mr. COX. The Lamb Company?
Mr. PARHAM. Yes, sir.
Mr. COX. And the Obear Nester Company?
Mr. PARHAM. Yes, sir.
Mr. COX. And on the second patent, the 1,655,391, which I shall hereafter refer to as the Peiler Patent merely for convenience —
Mr. PARHAM (interposing). All are Peiler Patents, Mr. Cox.
Mr. COX. Well, there is some dispute about that, although I understand it is their name.
Mr. PARHAM. Not in my mind, sir.
Mr. COX. Well, I am not going to discuss that with you now. I am just going to refer to it by that term so we won't confuse the numbers. This patent has also been important in your litigation?
Mr. PARHAM. You are also referring to 1,655,391?
Mr. COX. That is the patent you sued Hazel-Atlas Company?
Mr. PARHAM. Correct.
Mr. COX. Knape-Coleman?
Mr. PARHAM. Yes, sir. I beg your pardon. We did not sue Knape-Coleman on that.
Mr. COX. Was it on the other patent?
Mr. PARHAM. On the other one, the "phase change."
Mr. COX. And you sued the Reed Glass Company on this?
Mr. PARHAM. That is correct.
Mr. COX. And you sued the Florida Glass Company?
Mr. PARHAM. That is correct.
Mr. COX. And the Jeanette Glass Company?
Mr. PARHAM. I believe so.
Mr. COX. When was the 1,655,391 patent issued?
Mr. PARHAM. January, 1928.
Senator BORAH. Have you another name by which you can call that?
Mr. COX. I am going to refer to the 1,655,391 as the Pieler.
"SHAPING" PATENT
Mr. PARHAM. I'd call it the shaping patent.
Mr. COX. You might use the term which Mr. Parham did, calling it the shaping patent for 391 and the phase change for the other.
Mr. PARHAM. We ourselves call it the stuffing patent.
Mr. COX. Which one is this?
Mr. PARHAM. The same patent, 1,655,391.
Mr. COX. Have you any choice between "shaping" and "stuffing?"
Mr. PARHAM. I prefer "stuffing" because the feature of the patent is the stuffing of the upper end of the charge to give it a decided shape which is different from the natural shape it would have.
Mr. COX. That patent expires seventeen years after the date of issue, or about the second of January, 1945.
Mr. PARHAM. That is the law, yes, sir.
Mr. COX. And when was the "phase change" patent issued?
Mr. PARHAM. I will have to check. I think it was 1926.
Mr. COX. My recollection is that it was about that time and it expires sometime in February, 1943.
Mr. PARHAM. That would be correct.
Mr. COX. Now I want to call your attention to three other patents, Mr. Parham. They all start out with 2,073 and run from 2,073,571 to 2,073,573. Do you recall those patents? Do you have a copy of those?
Mr. PARHAM. I think I have copies of some of our patents with numbers in those series, yes, sir. There is a Peiler patent 2,073,572, I recognize as one of our patents; Steimer patent 2,073,571 I recognize as one of our patents; and patent to Steimer 2,073,573 is also one of our patents.
THREE PATENTS DESCRIBED
Mr. COX. What do you call these patents? I just want the term now.
Mr. PARHAM. We call the Peiler patent the heated hood case, simply a nickname in the office. The patent, as a matter of fact, is directed very broadly to the idea of feeding suspended charges by the use of viscous glass, the charges being hung up at the orifice of the feeder until a full charge is accumulated, at which time a pair of mechanical shears enter and sever the charge to permit a unit of glass to drop as a unit into the mold of the molding machine.
Mr. COX. What do you call the Steimer patents? Do you have one name for them, or two names?
Mr. PARHAM. I call them the Steimer patents. The one with the higher number is a very minor patent.
"HEATED HOOD" PATENT
Mr. COX. If I hereafter refer to the heated hood patent and the Steimer patents, you will understand what I am referring to?
Mr. PARHAM . Yes. The reason it is called the heated hood patent is, it happens the particular embodiment of that broad invention which is shown in the patent drawing shows a hood which comes down below the orifice or the opening in the feeder, and there is heat applied in that hood for the purpose of curing any scar which the severing operation might have left on the stream of glass.
Mr. COX. When were the Steimer patents applied for?
Mr. PARHAM. The Steimer patents were applied for in February, 1910.
Mr. COX. They were applied for by Mr. Steimer?
Mr. PARHAM. Yes, sir.
Mr. COX. Can you tell us when they were acquired by Hartford-Empire?
Mr. PARHAM. They were acquired by Hartford-Empire — they were not acquired directly by Hartford-Empire.
Mr. COX. They were acquired in the first instance by the Empire Machine Company.
Mr. PARHAM. They were acquired by Empire Machine Company and Hartford-Empire in 1917.
Mr. COX. The consideration for that acquisition was $2,300, is that right?
Mr. PARHAM. That sounds right.
Mr. COX. It is right, isn't it?
Mr. PARHAM. I believe so, as nearly as I can remember. I can check back and be sure.
Mr. COX. I want to review briefly with you the history of those two Steimer patents. They were in the Patent Office under consideration by an examiner from 1910 to 1916, is that correct?
Mr. PARHAM. Yes, sir, there was exparte prosecution as we call it, from 1910 to 1916, during which time Mr. Steimer's own attorney prosecuted the case.
Mr. COX. By the way, is Mr. Steimer still alive.
Mr. PARHAM, No, sir.
Mr. COX. When did he die?
Mr. PARHAM. I think it was along around 1919, but I am not certain.
PATENT "INTERFERENCE"
Mr. COX. Then from 1916 to 1925 these patents were involved in interference in the Patent Office, is that correct?
Mr. PARHAM. That is correct, sir. I think there were interferences that continued after 1925.
Mr. COX. I think there were, as a matter of fact, but there was a development at that point where at least under one of the patents there was a division and a patent issued under that division, is that, correct?
Mr. PARHAM. Yes, sir, there was a division, and the division was then put into interference and after that interference was over, the patent issued on the division; I take it you are referring to the division of patent which we put in suit.
Mr. COX. That is right. That is one of the patents that was involved in the Nevison-Weiskoff suits.
Mr. PARHAM . And in the Obear-Nester and Kearns-Gosuch suits, also.
Mr. COX. Going back to the part of the application still left in the Patent Office, that other part of the patent was prosecuted before the examiner and the Board of Appeals in the Patent Office from 1925 to 1929, is that correct?
Mr. PARHAM. I made a memorandum of those dates. After they came out of the interference in 1925, they were prosecuted before the primary examiner until April 14, 1927. Thereupon an appeal was taken.
Mr. COX. That was to the Board of Appeals.
Mr. PARHAM . That appeal was taken to the Board because of the general crowded condition of dockets. The Board did not render its opinion until August17, 1929. After an opinion adverse to the application had been rendered, we immediately filed a bill of complaint under 4515 Revised Statutes.
SUIT UNDER 4515 R. S.
Mr. COX. Perhaps the committee might like to know that is a provision-but you go ahead and describe it.
Mr. PARHAM. It is a procedure in the nature of a suit in equity which you bring to enforce the issuance of a patent which you believe is wrongfully refused by the Patent Office. It is used frequently in important cases where it is necessary to get the testimony of witnesses, it being impossible to make a record by testimony in the regular course of appeals in the Patent Office, and we wished the testimony in this case so we proceeded in that way.
Mr. COX. In other words, this was a situation where the Patent Office declined to give you a patent on your application and you took advantage of the procedure provided in this section to seek relief in the courts.
Mr. PARHAM. That is true to the extent that they had refused to give us certain claims which we thought we were entitled to. They had allowed other claims which we did not think adequately covered the invention.
Mr. COX. Do you recall why they re-fused to give you the claims?
Mr. PARHAM. It was a question of the prior art. It was a Hitchcock patent, I believe.
Mr. COX. Then you went to the Supreme Court of the District of Columbia, is that correct?
Mr. PARHAM. Yes, sir, we went there. We found that court docket quite crowded. We finally got to trial in November, 1932.
THE STEIMER PATENTS
Mr. COX. When was the suit filed?
Mr. PARHAM. The suit was filed on September 3, 1928. As I said, the trial took place in November, 1932. After the trial the court held the case under advisement for over two and one-half years and rendered a memorandum opinion on November 3, 1935, in general terms sustaining the position of the Patent Office. Appeal was taken to the Court of Appeals, District of Columbia, May 28, 1935. The case was argued April 9, 1936, and a decision favorable to Steimer was rendered December 9, 1936, and the patent was issued as promptly thereafter as possible.
Mr. COX. The court in effect directed the Patent Office to issue the patent?
Mr. PARHAM. Yes, sir.
Mr. COX. That history you have given covers the Steimer patents; except for the date of application, are the facts of that history substantially correct as applied to the Peiler patent?
Mr. PARHAM. No.
"THE PEILER PATENT"
Mr. COX. Will you tell us briefly what the difference was there?
Mr. PARHAM. It was in the latter course of the history, but the Peiler patent, known as the heated hood patent, the one I believe to be the basic patent in the gob feeding art, was filed in March, 1914. In 1915 the Patent Office suggested claims for interference. We were placed in interference with several applications and we were placed in several interferences. I believe the total number of those interferences was something like —
Mr. COX (interposing). Mr. Parham, you can go into as much detail as you would like, but what I am interested in is the chronology.
Mr. PARHAM. I would like to go into detail, because I want to paint the proper picture.
Anyway, it was in a large number of interferences which together extended fora period of twelve years. Thereafter we proceeded as in the Steimer case. That case was consolidated for trial with the Steimer case, thus getting an earlier date than it would otherwise have gotten. We took an appeal at the same time and got a favorable decision from the Court of Appeals and were issued a patent as promptly as possible.
Mr. COX. Can you tell us exactly the date when that heated hood patent issued?
You haven't told us that yet, have you?
Mr. PARHAM. No, I didn't.
Mr. COX. I think it was issued March 9, 1937.
Mr. PARHAM. March 9, 1937, is correct. That's right.
Mr. COX. Of course that patent will exist for 17 years. Is that correct?
Mr. PARHAM. From that date.
Mr. COX. And expire in 1954?
Mr. PARHAM. Yes, sir, that is correct.
BASIC PATENT
Mr. COX. A moment ago you described that heated hood patent as a basic patent in the gob feeding art.
Mr. PARHAM. I believe it to be so.
Mr. COX . Do you mean by that that the patent covers all of the known forms of feeding automatically feeding, glass in gobs to forming machines?
Mr. PARHAM. I should say it covers all suspended charge feeders; if that is what you understand by "gob," it covers all gob feeders.
Mr. COX. When you say it covers all suspended charge feeders, you mean every kind of feeder in which the gob, after it comes through the orifice, hangs without any support?
Mr. PARHAM. Let me correct myself a moment. The broad claim which I believe it practically covers, all suspended charge feeding or gob feeding, if you wish to use "gob" to mean suspended charge, covers all of those types of feeders which I know of in which viscous glass is employed and in which the charges are cutoff by mechanical shears. I do not happen to know of any commercial feeders which do not use viscous glass and the severance by mechanical shears.
AUTOMATIC GLASS FEEDERS
Mr. COX. Would it be accurate to say, then, that that patent covers all automatic glass feeders excluding the Owens suction machine?
Mr. PARHAM. No, sir.
Mr. COX. What doesn't it cover?
Mr. PARHAM . The feeders known as stream feeders, of which there have been quite a variety in the past, are not covered by that patent. There are some of those being used commercially now at the Kerr Glass Company, particularly. They use a stream feeder to make pressed and blown ware. I happen to know of another company, which is not in the container art, which also uses a stream feeder. I think the Hazel-Atlas Company and Ball Brothers use stream feeders for certain articles.
Mr. COX. Perhaps I might interpose this question : Is there any other feeder besides the Owens suction and the stream feeder that you think is not covered by this patent?
Mr. PARHAM. Yes, sir. There is what is known as a ribbon feeder.
Mr. COX. That is not used for containers to any great extent, is it?
Mr. PARHAM. To make tumblers.
Mr. COX. That is pressed and blown ware, usually, isn't it?
Mr. PARHAM. No, sir; tumblers are paste mold ware.
Mr. COX. I am speaking of the commercial classification in the industry.
Mr. PARHAM. I think still they are paste mold.
Mr. COX. Is it ever used to make milk bottles?
Mr. PARHAM. No.
Mr. COX. Fruit jars?
Mr. PARHAM. No.
Mr. COX. Used to make packers' ware? I am asking about packers ' ware, which is used to pack food, and I ask you now whether you can tell me any place in this country where that feeder you have named is being used for that purpose.
Mr. PARHAM. The feeder which I name is being used by the Corning Glass Works at its Providence plant to make articles which you may call either the tumbler or a container, a packers' container, according to the way it is used. The ones that are being made there to my knowledge are sold as tumblers. They are not used as tumblers, but identically formed and shaped articles, made by the Westlake process, are used as packers' ware.
Mr. COX. Are those made and sold as packers' ware?
Mr. PARHAM. I understand they are.
Mr. COX. What company does that?
Mr. PARHAM. Libby Glass Company.
Mr. COX. They make them and use them themselves?
Mr. PARHAM. They make them and sell them; they do not fill them themselves.
Mr. COX. Is there any place else you can think of where that machine is used for making containers of any kind?
Mr. PARHAM. I can think of no other place.
Mr. COX. Is it ever used to make narrow neck ware of any kind?
Mr. PARHAM. Not that I know of.
Mr. COX. Opal ware?
Mr. PARHAM. Not that I know of.
Mr. COX. You are quite sure about the ribbon machine being used by Libby?
Mr. PARHAM. I didn't say the ribbon machine is being used by Libby. The Westlake machine is being used by Libby to make an article which is in the shape of a tumbler and which may be used by packers. The Corning Glass Works uses a ribbon machine.
Mr. COX. Is the Westlake machine not covered by this patent we are talking about?
Mr. PARHAM. No, it is not.
TYPES OF GLASS FEEDERS
Mr. COX. You have named four feeders, the Owens suction feeder —
Mr. PARHAM (interposing). I don't call that a feeder.
Mr. COX. That's all right. Mr. Smith and I were talking that way yesterday. And the Westlake feeder, the ribbon machine, and the stream flow feeder you say are not covered by this patent. Is that correct? Can you think of any others?
Mr. PARHAM. I can't think of any others at the moment.
Mr. COX. So, except for those four, this patent covers all known forms of gob feeders, is that right?
Mr. PARHAM. I think that is true, and none of the four that I mentioned are gob feeders.
Mr. COX. And none of them are used extensively except possibly the stream feeder for production of glass containers. Is that correct?
Mr. PARHAM. Well — Mr. COX (interposing). I am not asking what can be done, I am asking what is done today.
Mr. PARHAM. I realize that, but the question is, do you mean extensively by a large number of concerns, or by that do you mean to make a lot of ware, because the ribbon machine makes lots of ware.
Mr. COX. I mean, what part of the glass containers now manufactured in this country, and by containers I am not speaking of tumblers or tableware or anything of that sort, is made by that sort of machine?
Mr. PARHAM. I am not a statistician and I don't know the exact figures. I think Mr. Smith told you yesterday that something in the neighborhood of 30 percent or more were made by means other than the gob feeders.
Mr. COX. You know, don't you, that most of that 30 per cent is made by the Owens suction machine?
Mr. PARHAM. I know a good portion of it is.
Mr. COX. Most of it is — 29 per cent.
Mr. PARHAM. I don't know the exact figures; I am not a statistician.
Mr. COX . You heard Mr. Smith testify yesterday that it was 29 per cent?
Mr. PARHAM. I will accept his word for it.
Mr. COX. You don't have to be a statistician for that, do you?
Mr. PARHAM. No.
"STREAM FEEDER" PATENTS
Mr. COX. You are quite clear, are you, that this new patent, the Peiler patent, doesn't cover the stream feeder?
Mr. PARHAM. You mean by Peiler patent the heated hood; it does not cover the stream feeder. Now which stream feeder are you speaking of?
Mr. COX. I am speaking about the same stream feeder you were talking about.
Mr. PARHAM. When you speak about the old Brooks feeder, it does not. There may be modifications that come under some claim, but I don't believe there are, don't think the other feeders are covered.
Mr. COX. Is that what you are going to say when you sue those people sometime, Mr. Parham?
Mr. PARHAM. Why do you assume that I am going to sue those people?
Mr. COX. You sue everyone sooner or later, don't you?
Mr. PARHAM. I don't think so. We sue only where there is infringement.
Mr. COX. I assume that that is so.
Representative SUMNERS. Mr. Chairman, I hardly believe that is very illuminating.
Senator KING. I share your views.
Mr. COX. I think the witness is being reluctant. I think, as a matter of fact, if we are called upon to demonstrate the litigation policy of this company, we can show that they have sued or threatened to sue almost everybody.
Representative SUMNERS. How is that to guide us in our determination of policy on this thing?
Senator BORAH. I think it has a great deal to do with it.
PATENT LITIGATION
Mr. COX. I am not going to pursue it any farther, but I would like to point out this to you, sir, that one of the most effective ways of using a patent to achieve a position of dominance .in an industry, quite apart from the rights which the patent gives you as a patent, is by litigation, because if you have the resources to engage in litigation you can eventually wear out your competitors or so weaken them that their competitive position in the industry is one where they are of little or no account. We expect to produce some testimony of that kind.
The CHAIRMAN. May I suggest, Mr. Cox, that you ask the witness to state in his own language why he termed this particular patent of which you are speaking a basic patent.
Mr. GOODRICH (of counsel for the witness). May I request that in view of Mr. Cox's statement this witness be permitted to go into the various suits this company has brought, to show why those suits were brought, because it is our position that we sued where our patents were being infringed, and no place else.
Mr. ARNOLD. Mr. Chairman, it seems to me that to get an orderly presentation of this matter we must present our case. It seems to me that Mr. Cox is quite right; the witness has seemed some what reluctant. We are sorry if we seem to delay matters, but such presentations as Mr. Goodrich is talking about I think should come at a later time, because if both the point of view of the Department and the point of view of the company are presented at the same time, we will get nothing but confusion, and I will ask the committee to bear with us a little bit on some of this cross-examination.
The CHAIRMAN. There will be that opportunity.
Mr. PARHAM. I have no intention of being reluctant. I simply try to be exact as I can be, because I think the picture needs to be exactly defined, and not to be painted in broad terms.
The CHAIRMAN. I think the committee understands that. May the Chair suggest, both to the witness and Mr. Cox, that if we proceed with less fencing between the two very able gentlemen and get down to brass tacks we will proceed more rapidly?.
Mr. COX. Perhaps we can move on to something that is a little less controversial.
BASIC PATENT
Senator KING. I would like that question answered, because I think that might save some cross-examination - as to whether this was a basic patent.
The CHAIRMAN. Why you think it isa basic patent.
Mr. PARHAM. I consider it a basic patent for the reason that the patent contains claims which, in my opinion, express the fundamentally important thought which Mr. Peiler had when he originated this new art of gob feeding. That thought, as I understand it, is the use of much more viscous glass than was ever used before in mechanical feeding, and the control of that glass so that it would hang up until the entire charge was in suspension below the orifice, whereupon the exact quantity would be cut off quickly by mechanical shears.
The CHAIRMAN. Am I correct in understanding that in the trade, so to speak, a basic patent is such a patent that, in the then current state of the art, it is necessary for the construction of any efficient machine to do the particular work that is required to be done?
Mr. PARHAM. I don't know as I follow you, quite, Mr. Chairman. My thought is this, that a basic patent, in my opinion, is the patent which lies at the base of anew advance of some considerable magnitude.
The CHAIRMAN. In the present state of the art and without which the art cannot be carried on in the most efficient manner?
Mr. PARHAM. In that particular branch of the art, yes, sir.
The CHAIRMAN. So that when you speak of this as a basic patent you mean by that that it is such a patent that any company which undertakes to engage in the manufacture of that type of glass for which this machine is used would not be pursuing a most efficient method of manufacturing it without the use of this patent in some form?
Mr. PARHAM. Well, I think that hap-pens to be true in this particular case, but you may have several different lines of developing it from a base.
The CHAIRMAN. Certainly.
Mr. PARHAM. You may have several different bases, and they all may end up with the same ultimate article, but the company that has the basic patent on the most efficient way is the fellow who is on top.
The CHAIRMAN. He controls the industry. That is the point.
THE "STUFFING" PATENT
Mr. COX. I would like to revert, for a moment, to a patent we were talking about a little earlier, 1,655,391, the "stuffing" patent, and I yould [sic] would like to have you tell the Committee how wide you think the scope of that patent is so far as it relates to gob feeding.
Mr. PARHAM. I think I can best tell the Committee that in terms of the opinion in our case against the Shawkee Company. In the opinion of Judge Buffington, the formal title is Shawkee Manufacturing Company et al, vs. Hartford Empire Company, 68 Fed. 2nd , 726.
Judge Buffington, speaking of the invention of that patent, stated, "The functional invention of that patent was the swelling of a gob in suspension to desired shape and shearing such shaped gob in suspension."That patent, as you see, adds to the earlier patent the thought that the charge is to be artificially shaped in a certain way, that is, by stuffing it, and that is the reason we call it the stuffing patent.
The suit to which I have referred, Your Honors, was brought by us to stop the infringement of this patent by one of these air feeders which was spoken of yesterday. The description of the court here shows that the invention applied to an air feeder even though the patent drawings showed a plunger feeder.
I thought that might clear up some difficulty, that there seemed to be question as to plunger feeder being one thing and an air feeder another. There are different species of the same invention which are covered by these Pieler patents. There are also some specific inventions under those broud [sic] broad inventions on each, but they are really not two absolutely different things.
Mr. COX. Have you finished, Mr. Parham?
Mr. PARHAM. Yes.
Mr. COX. Would you say this patent whose scope you have just described is a narrower or wider patent than the "heated hood" patent?
Mr. PARHAM . It is a narrower patent.
Mr. COX. Now, thinking in terms of machines, Mr. Parham, what kind of automatic feeders in use today are not covered by this "stuffing" patent just described?
Mr. PARHAM. You mean in use today — are you limiting that question, or are you referring to feeders which have been in use and which have been supplanted by this preferred form, because there are some of those.
Mr. COX. I am speaking first of the feeders which are in use today.
Mr. PARHAM. The feeders which I referred to previously, the stream feeders, and if you want to call it such, the Owens device and the ribbon device and the Westlake device. In the other field, this superseded our own commercial paddle feed, which was our first commercial gob feeder.
Mr. COX. So that in terms of machines now in use the two patents cover relatively the same ground. I don't mean that the patents are the same, but the machines that fall under one, also fall under the other, is that right?
Mr. PARHAM. Anything that falls under the narrower automatically falls under the broader patent, obviously.
Mr. COX. Now, when the narrower patent expires in 1945 — doesn't it —
Mr. PARHAM (interposing). I believe that is correct.
Mr. COX. Anyone who is using one of your feeders on January 4, 1945, or anyone who is using one of the feeders, some other kind of feeder, which is covered by, which falls within, the claims of the patent which expires say on January 2, 1945, will not be free on January 4, 1945, to continue to use that feeder without paying royalties to you, will he?
EXTENT OF PATENT MONOPOLY
Mr. PARHAM. He will not be free of the monopoly granted by the Patent Office on the broader patent which came out later, and therefore we would probably claim royalties.
Mr. COX. You won't probably; you will, won't you, Mr. Parham?
Mr. PARHAM. I don't dictate the policy. I would suspect we would, though. I would advise it.
Mr. COX. I wanted to find out how strong your qualification was.
Mr. PARHAM. I would advise it.
Mr. COX. So that monopoly would extend, then, for another ten years, is that correct?
Mr. PARHAM. The monopoly on the later patent will extend for another ten years, but the monopoly, which is a different monopoly, on the narrower pattern, will have expired.
Mr. COX. But the broader monopoly will continue under the patent which went into the Patent Office in 1910 and came out in 1937.
Mr. PARHAM. Yes, sir; having started later, it will end later.
Representative SUMNERS. Will you develop that pretty well? That is a very important point, it strikes me, right on that point.
Mr. COX. You mean the length of time it was in the Patent Office?
Representative SUMNERS . You have an idea that is patented 'and the right to use that particular article, we say, will expire in five years. Then, from this answer, it seems to me that it is possible to go in and get a broader patent in which you can bracket in, maybe not only this one, but innumerable others, that people can't use. On what theory is that. I mean, it is rather important for us to know about it, I think.
Mr. COX. I would like to have Mr. Parham tell you about that.
THEORY OF PATENT LAW
Mr. PARHAM. Well, as I understand it ,the theory of the patent law provides for the grant of a patent on each invention. If you have two inventions you may have two patents, assuming they are both inventions and the Patent Office, finds them so.
Now, an inventor may make his broad invention first (he always makes it first, as a rule). I shouldn't say "always." As a rule he makes it first. He applies for his patent application, asking for a broad patent on that thing that he has invented. He goes on and works further to improve what he has made in the first place, and in the course of making that improvement the invents something further. He makes a second invention. He applies for his application on his improved invention,
Representative SUMNERS. Let me ask you a question, to get right down where we can understand it. Suppose there are four patents, a, b, c, and d, and they are approaching expiration, and there maybe a number of things that can be made by people by using the patents a, b, c, and d, each. Now then, is it possible under our patent law for somebody to come along and take out another patent which would preclude these individuals who could use one of those pieces of machinery, with which you did a, b, c, and d? I don't understand your language but maybe you can get mine.
Mr. PARHAM. It is not possible for a later inventor to cover any of those four things, but if an earlier inventor had applied earlier than those four patents for his application, and his application had been delayed so that his patent came out after the patents on the four things you are speaking of, then it is possible that for a period there is a control of those four things. That is possible under the law.
Representative SUMNERS. Is that on the theory that he earlier applied for the patent and that you are now granting him the patent on an idea that probably antedated these four?
Mr. PARHAM. That is the idea, sir. The idea is based on the later patent.
Representative SUMNERS. I have got it.
DELAYS IN APPLICATIONS
Senator BORAH. Assume that Mr. A had made application for a patent is delayed for ten or fifteen years. Somebody else comes in and makes application and covers part of this territory that has been covered by the previous application. Does the Patent Office go forward and issue a patent while there is another application pending?
Mr. PARHAM. If the second man has an improvement and the first man is not claiming that same improvement, yes, sir.
Mr. ARNOLD. That would be part of the fencing process, wouldn't it?
Mr. PARHAM. No, sir, I don't understand that as a fencing process.
Mr. ARNOLD. A blocking process?
Mr. PARHAM. No, neither one in my mind. It is a simple operation of the patent laws, when you consider the possibility of the patent on the broad invention being delayed in the Patent Office longer than the one on the narrower invention.
The CHAIRMAN. And it makes no difference whether the two applications are associated?
Mr. PARHAM. It makes no difference.
The CHAIRMAN. But it is my understanding from your testimony that no application for a basic patent may be filed after the narrower patents have been issued and then be granted?
Mr. PARHAM. Well , the narrower patent would probably be barred under the law.
The CHAIRMAN. Yes, but if the application of the basic patent has been filed and subordinate patents were afterwards asked for and issued, their issuance would not be a bar to the issuance of the other patent.
Mr. PARHAM. You have correctly stated the matter.
Mr. ARNOLD. It might enlighten the committee, Mr. Cox, if we introduce the statement of stipulated facts in the Ethyl patent case. Isn't that a somewhat similar situation?
Mr. COX. Somewhat similar, yes.
Mr. ARNOLD. You might for the benefit of Representative Sumners —
Representative SUMNERS (interposing). I have wised up on it. I don't need it.
BROAD AND NARROW APPLICATIONS
Senator KING. I'd like to ask one question, if I may be permitted. Suppose hat A, B and C do file application for patents which are covered by the broader patents which antedate that, and the Patent Office grants to A, B, C and D patents somewhat narrower yet carrying out the same policy and the same thought that is in the broader patent. Then the broader patent is issued. Does not that, if it is issued to different and conflicting interests, destroy the A, B, and C patents? What is the effect? Does the broader one nullify the subordinate one or do they all exist?
Mr. PARHAM. If they are owned by different parties —
Senator KING (interposing). I am assuming they are.
Mr. PARHAM. The owner of the broad patent may use his own embodiment of the patent and any other embodiment he can think of except those patented to A, B and C, who have the narrower patents. He cannot use those narrower embodiments because they are covered by the patents to A, B and C. They can be a stalemate then.
Senator KING. It seems to me, if you give a blanket patent, a broad patent, and then you attempt to give little narrower patents, that when the broad patent is granted it would supersede the narrower one, and the holders of those narrower ones could be debarred from exercising them.
Mr. PARHAM. As a matter of practice, I don't think they supersede really because if I have the broad patent and you have the narrower and improved patent, the chances are, the presumption is that your machine is going to be better than mine because it is an improvement on mine and there is a great incentive immediately for me to use your machine and as a practical matter I think the patent usually finds its own level and business will goon by some accommodation between us. I think we'd both be foolish if we didn't. I am not so certain of that as a general policy, but it is so in my own mind.
Senator BORAH. Did you ever hear of a better scheme for manufacturing litigation?
Mr. PARHAM. Well , I would hardly say that the Patent Office manufactures litigation for the person who takes out patents. It is the fellow who comes out, who tries to take without payment the invention of the other fellow that stirs up the litigation.
Senator BORAH. That is always true.
Mr. ARNOLD. May I ask a question?
The CHAIRMAN. Pardon me just a minute, Mr. Arnold. Vice-Chairman Sumners wanted to ask a question.
"PATENT APPLIED FOR"
Representative SUMNERS. I see once in a while articles that have stamped on them "patent applied for." Does that afford any protection?
Mr. PARHAM. I don't think so, no, sir, it is not provided for.
Representative SUMNERS, Now if a person manufactured an article where just a patent was applied for, and afterwards if it was hung up five or six or eight or nine years, and if he does get a patent and this other person has been making that thing, is there anything could happen in a law suit about it?
Mr. PARHAM. I don't think that notice is worth anything.
Representative SUMNERS. Well, apart from the notice, if a person applies for a patent and during the process of determination as to whether he is to have it, somebody manufactures an article that is covered by that patent, is there any possibility of any of these law suits?
Mr. PARHAM. No, sir, during the period that the application is in the Pat-Office, any one who knows about the invention may apply it and be subject to no suit until the patent issues, and he is only liable for his acts after the patent issues.
"FENCE" AROUND PATENTS
Mr. ARNOLD. I'd like to ask a question simply to relate your previous testimony to testimony given yesterday, in an exhibit which is headed, "Memorandum on Policy of the Hartford-Empire Company," (Exhibit No. 124 age [sic] page 211).
I do not wish to raise now the testimony which has already been given as to whether that was or was not the policy. There is a statement of policy under "c" on page two of that memorandum which reads as follows: "To secure patents on possible improvements of competing machines so as to fence in those and prevent their reaching an improved stage. "Now, that particular process referred to would be effectuated by just the thing which we are discussing wouldn't it?
Mr. PARHAM. I don't think the two things are tied together very much, Mr. Arnold. My idea there —
Mr. ARNOLD (Interposing). Wouldn't this fence in the basic patent by creating a stalemate?
Mr. PARHAM. It would prevent — the narrower patent would prevent — the owner of the broader patent from using the improvement, that is correct.
Mr. ARNOLD. And don't you think that is what that sentence in that memorandum refers to?
Mr. PARHAM. Of course, it is not my memorandum. My idea is on that particular matter that we have always filed our application with the idea of keeping our inventions ahead of the other fellow.
Mr. ARNOLD. I wasn't referring to whether this was your policy or not, because that was gone into yesterday, but don't you think that that particular sentence, whether it is or isn't your policy, refers to this process we have just been discussing?
Mr. PARHAM. Well, to my mind, it would refer to any taking of patents on your own inventions, for the purpose of developing the other man's machine, perhaps, for keeping up with the art in your own machines and in connection with your competitor's machine.
Mr. ARNOLD. This says "to secure patents on possible improvements of competing machines."
Mr. PARHAM. Yes, sir.
Mr. ARNOLD. So the discussion we have been having on this process probably related to that fencing-in method, doesn't it?
Mr. PARHAM. I don't think the immediate discussion we have had really particularly applies to that one thing, Mr. Arnold. Maybe I don't understand you well. I am trying to be helpful in connection with it, but my thought there is that what was intended to be expressed in, maybe, office shorthand, was the idea that we were going to search constantly for the improvements that could be made in our own and competing devices so that we would always have the best situation and could furnish the best device.
Mr. ARNOLD. But this statement says, "to prevent their" (and that refers to competing machines) "reaching an improved stage."
Mr. PARHAM. That wouldn't be my idea.
Mr. ARNOLD. But it could be accomplished by that process, but as a matter of fact when you did accomplish that you would actually yourself have brought that machine to the improved stage.
The CHAIRMAN. Mr. Parham, isn't this all a very simple, practical matter?
Mr. PARHAM. I think so.
PRESERVING PATENT RIGHTS
The CHAIRMAN. A patent is a very profitable right which is granted by the Government. The holder of the patent is naturally desirous of maintaining the monopoly which it grants as long as he can. Therefore, he would like to prolong it, if that were possible.
Mr. PARHAM. Yes, sir.
The CHAIRMAN. Therefore, when a patent is acquired by a large concern with large resources capable of establishing re-search bureaus and employing competent legal staff, isn't it a perfectly natural thing for such an organization to do what you have just described, namely, study intensively all possibilities of improving not only the patent which that concern itself owns, but every competing patent?
Is not the natural and inevitable result of that (and from the point of view of the patentee the desirable result whether or not it be desirable from the point of view of the public or from the Congress) that it affords the opportunity of the adroit, of the able, of the studious holder of a patent to do just exactly what Mr. Smith's memorandum said, fence in competing patents so that the person who develops these improvable patents finds himself in a position to control the competing patent?
Mr. PARHAM. It doesn't, of course, control the competing patent, but he controls the next step in the art.
The CHAIRMAN. That is right.
Mr. PARHAM. And I say it is my belief that it is a very fine way in which to develop the art, because you have got to do something positive before you can I do the negative thing of fencing.
The CHAIRMAN. But it is also a very fine and a very efficient way to concentrate control of the particular industry that may be involved.
Mr. PARHAM. It may be, if you have the brainier men that get the most inventions, you might possibly get the control.
The CHAIRMAN. You understand what we are after. We are merely interested in seeking the effect of these policies.
Mr. PARHAM. I realize that. I am trying to give you all I can on it.
Senator KING. I assume that the competing companies would also be utilizing their brains.
Mr. PARHAM. Absolutely.
RIVALRY ON BASIC PATENTS
Senator KING. And engaging in research in order to fence in their patents.
Mr. PARHAM. That is exactly what happens.
Senator KING. So that each company, each inventor, is trying to improve and to cover the field that some other inventor is trying to cover, so there is rivalry between companies in order to secure the very best improvements upon basic patents.
Mr. PARHAM. Well, I personally believe you are absolutely right about that.
Senator KING. I am not defending it, I am simply stating what is the view.
Mr. PARHAM. I also say if we didn't follow our policy of continuing improving, we wouldn't last very long, somebody would get ahead of us.
The CHAIRMAN. May I interrupt your examination, Mr. Cox, long enough to say that what impresses me is that we are now developing facts which show the operation of groups rather than persons. Mr. Kettering testified here the other day to the effect that we have entered the group era in the development of patents, and he pointed out the various research bureaus which are operated to illustrate that point of view.
So here in the patent situation, therefore, we have this condition: the patent isa grant from the government; it can't exist except by the act of government. The corporation which holds the patent also arises by reason of a grant from government, so here we have two artificial creations of government which lay the basis and create the opportunity for the condition which has been developed by the Hartford-Empire Glass Company in the manufacture of glass containers.
Mr. PARHAM. I don't know as the corporate end of it has very much to do with it. One rich man would have hired allthe rest of us to go to work, as well as the corporation.
The CHAIRMAN. But as a practical matter, one rich man would not do that.
Mr. PARHAM. It is probably necessary to have the corporation, yes.
COMPETITION IN INVENTIONS
Mr. ARNOLD. You made one statement that interested me in answer to Senator King's question. You spoke of the opportunities that might develop to prevent these blocking situations if, because of competing companies, each invention and improvement of theirs is changed. Thatould indicate you believe as a matter of social policy the situation would be happier if there were more competing companies in glass.
Mr. PARHAM. I am trying to think it through, Mr. Arnold, with all its implications. Of course, the fact is that if this company of ours hadn't come along there might not have been as many competing companies as there are now. I don't know of any reason why another company might not start and do what we did, and make still further competition, and that might not be desirable.
We think we have used our patents properly. We might have done a very selfish thing in a way or it might not have been so selfish. Instead of licensing anybody on our basic inventions we might have built a glass plant and made all the glass that would have been made by the gob feeding method, and that we would have been entitled to do under our basic patent. I think we have created more competition than had we done that, a great deal more competition. Whether that would have been smarter or not I don't know. I don't pass on it, but it could have happened.
Mr. ARNOLD. Of course, I wasn't criticizing the policy because if the Government gives you a monopoly I suppose we have no right to criticize you for using it.
PATENT INTERFERENCES
Senator KING. Would it interrupt your procedure if I ask one question?
Mr. COX. No, certainly not.
Senator KING. Reference was made to the long period that some of these patents were held in the Patent Office, so that application made way back in 1910 and the final patent wasn't obtained until along in the '30's. It seems to me that if your organization or any company contributes to those delays, there ought to be some penalty, and I was wondering if those delays there were in any way contributed to by your organization or its subsidiary.
Mr. PARHAM. I don't know. I would say they were not, sir. That is just the course of events. I personally have some ideas about changes that should be made.
Senator KING. Who filed those interferences which delayed the granting of the patents?
Mr. PARHAM. The interference is always declared by the Commissioner of Patents when two applications exist which have the same or substantially the same claim to invention. Neither applicant starts that interference; otherwise than by making his own claim through his own invention.
Senator KING. When this application was made adverse to the application of your corporation or your predecessor, or when the predecessor assigned his patent to you, did he use due diligence in trying to eliminate that interference and adopt all the process which would culminate in a patent?
Mr. PARHAM. It is my belief, sir, that he did.
Senator KING. I would be in favor, if I may be permitted to express an opinion now, of some policy under the terms of which those interferences may not be continued indefinitely, so that when a patent is applied for it may be issued at the earliest possible date.
Mr. PARHAM. I concur with your opinion heartily, sir, and I think that is one place where we really need a change in the patent law. I think the substance of the patent law is all right, but the procedure is bad in that respect.
The CHAIRMAN. Mr. Cox, you may now have the floor.
VALIDITY OF PATENTS
Mr. COX. Mr. Parham, the mere fact, of course, that the Patent Office issues a patent doesn't mean it is valid, does it?
Mr. PARHAM. It is presumably valid until the courts find otherwise.
Mr. COX. That is the point I wish to make, that it still must run the gauntlet of the courts, is that correct?
Mr. PARHAM. Very often it does, but frequently its validity is recognized by those who wish to deal in it.
Mr. COX. But the law provides for judicial test.
Mr. PARHAM. Yes, sir.
Mr. COX. Now take the patent you were talking about a moment ago, this heated hood patent. That was in the Patent Office for a long time, wasn't it?
Mr. PARHAM. Yes, sir.
APPEALS TO COURTS
Mr. COX. Involved in a lot of interferences, and the Commissioner of Patents in the Patent Office finally refused to issue a patent on the [spell:aplication,application], and they were afterwards directed to do so by the courts. Are those all circumstances which someone who wanted to contest the validity of the patent might raise?
Mr. PARHAM. Absolutely, sir.
Mr. COX. You think they could, and of course it is right they should raise them.
Mr. PARHAM. Even the decision of the Circuit Court of Appeals is not necessarily binding in an opinion. It is persuasive, of course.
Mr. COX. Now Mr. Parham, will you just tell us who there is manufacturing glass containers in the United States today who could contest the validity of this heated hood patent in court?
Mr. PARHAM. They can contest the heated hood patent in court when, as, and if they are sued on the basis of that patent, or if they are threatened with suit on that patent I believe they can proceed under the proprietory [sic] proprietary judgment act, and that applies to anybody who is present in the suit.
RIGHTS OF LICENSEES
Mr. COX. Could any of your licensees raise the question of validity of that patent?
Mr. PARHAM. Our licensees probably would raise the question, yes, if they were sued for an infringement.
Mr. COX. Could they legally?
Mr. PARHAM. They have no occasion to raise it while they are licensees.
Mr. COX. Suppose they cease to be licensees, could they raise it?
Mr. PARHAM. If they cease to be licensees, they could raise the point, yes, sir.
Mr. COX. Mr. Parham, I would call your attention to a provision in the license granted the Florida Glass Company, put in evidence yesterday. I will read from it as follows:
"So long as this license remains in force, the licensee agrees not to dispute the validity of the letters patent under which this license is granted, some of which are set forth in Schedule E annexed hereto, so far as these patents apply to the methods and machines which are hereby licensed to the licensee." (Exhibit No. 118.)
I take it that means as to all of your licensees, they could only contest the validity of that patent if they or you should terminate their license, is that correct?
Mr. PARHAM. I think so. It says so long as the license is in force they shall not contest the validity of the patents under which they are licensed, in so far as they are in the licensed machinery.
Mr. COX. So if they want to contest the validity of that license or that patent, they have to run the risk of terminating your license and finding glass making machinery elsewhere, is that right?
Mr. PARHAM. Surely. It is very much like certain other doctrines of law, you can't hold a right and dispute it at the same time. In fact, the law implies that same thing.
Mr. COX. Of course, this patent right is a right which you acquire after the license is made in the case I am speaking of, isn't it? This patent was issued in 1937 and that license agreement was is-sued before then.
Mr. PARHAM. Oh, yes, I believe that is true, but they were licensed under the applications.
Mr. COX. As soon as the patent comes out, you put the number of the patent on a plate on the machine, do you not?
Mr. PARHAM. We usually do, yes, sir.
Mr. COX. And that binds the licensee by the estoppel set up by this provision in the license.
Mr. PARHAM. I believe so . There maybe some cases that would take issue with that.
Mr. COX. So the only people on that chart who could contest the validity of the patent today without making a change in their method of manufacture would be the three companies over there on the right, the three independent companies?
The CHAIRMAN. Will you identify the chart?
Mr. COX. This is the chart that was introduced in evidence yesterday as Exhibit No. 113. (Page 197)
Mr. PARHAM. Of course, it is true that any one of the three so-called independent plants which you show on this chart can contest the validity of any patent. It is true that any one of the licensees may contest that validity when they cancel or abrogate or breach their contract or are sued in infringement.
Mr. ARNOLD. That means they practically have to go out of business first in respect to the methods they were using in conducting the business.
Mr. PARHAM. I don't know as they would go out of business. If they became infringers they would still be in business or they wouldn't be infringers.
Mr. ARNOLD. You have title to the machinery in their plants in most cases and could take it out.
Mr. PARHAM. Yes, sir, but we have to proceed to the court to prove we are entitled to it.
PURPOSE OF LICENSES
The CHAIRMAN. It all amounts to this, that you have entered into contractual agreements with a number of individuals by which you have licensed them to use the patents which you hold, and in turn in these license agreements you have bound each of them contractually not to bring litigation against them.
Mr. PARHAM . Yes, sir. It is not to bring litigation against us; it is not to dispute the title of the thing under which they are licensed. That is what it amounts to and it is exactly what the law provides without this provision.
Mr. COX. Of course, that is a kind of automatic estoppel, isn't it? It operates as soon as you put the patent number on the machine.
Mr. PARHAM. I would assert it would.
Dr. LUBIN. May I clarify my own mind in the statement you have just made. As I understood it, this licensee agreed to these things before the patent had ever been granted by the Patent Office, is that true?
The CHAIRMAN. I didn't understand that.
Mr. PARHAM. It appears to be the fact, that as to the particular instance Mr. Cox was referring to, the license was granted ahead of the issue date of that patent, yes, sir.
PURPOSE OF APPLICATIONS
Mr. COX. I think one more question and we will finish, if you don't mind bearing with me for a moment. Mr. Parham, I thought I understood you to say in response to some questions of the committee that it was your belief that Hartford-Empire Company does not file applications in the Patent Office except with the view of obtaining patent?
Mr. PARHAM. I will say with very, very few exceptions I personally recommend that. I think we have filed a few applications upon details of machines which we were to put out where I had very, very grave doubt of patentability and I filed the application for the very purpose of making a record in the Patent Office that we had such a device at that time. The Patent Office has refused to grant patents, and I have concurred in that refusal, but the record is there in the Patent Office should I need it, if someone else tries again to get a patent on that improvement and stop our use of the invention.
Mr. COX. Do you recall any specific cases where you filed applications for that purpose and not with the view to getting a patent?
Mr. PARHAM. I am sorry to say I can't tell you. I just recall there have been several instances when my doubt of the patentability was so great that I expected to do that when I filed the application.
Mr. COX. You don't recall any instance where an aplication [sic] application has been filed primarily for the purpose of throwing some other application into a series of interferences?
Mr. PARHAM. Have you something particular in mind? I will be glad to help.
Mr. COX. Will the reporter read the question. I want an answer.
(The last question was read.)
Mr. PARHAM. I can think of one occasion when we had purchased an application and we tried to get it in condition to get it into interference with another application of another party. Yes, I remember that. There may be other instances, I don't recall any right now.
Mr. COX. Is this one you are speaking of now in 1924?
Mr. PARHAM. What I have in mind is the Headley-Thompson case, if that is what you have on your mind. It is the same thing.
WHITALL-TATUM LICENSE
Mr. COX. I have a copy of a letter which purports to have been written by Mr. Brown in 1924. Mr. Brown was the chief patent counsel for Hartford?
Mr. PARHAM. Yes, sir, and vice-president.
Mr. COX. Written to Mr. Henry W. Carter of Owens Bottle Company of Toledo, Ohio. There is a paragraph which I shall read to you and I ask you if this is the same incident to which you refer. Perhaps I had better start at the beginning. "It seems rather likely that the negotiations with Whitall-Tatum will fall through." Can you tell us what those were?
Mr. PARHAM. The negotiations with Whitall-Tatum were to obtain the right to a license; the negotiations for a license, to obtain a license under the Headley-Thompson applications which we had learned of in about 1920, and which we feared would cover and control the types of narrow neck-forming machines which were being used by our licencees [sic] licensees with our licensed feeders.
Mr. COX. I will resume reading. ". . . .the negotiations with Whitall-Tatum will fall through or be deferred in such a way that we shall have to stage a delaying fight. Mr. Burns says" — Is that one of the patent lawyers for Hartford-Empire?
Mr. PARHAM. Mr. Burns in this connection was not a patent lawyer. He has been employed in other connections.
Mr. COX. What was he doing in this connection?
Mr. PARHAM. He was representing Whitall-Tatum Company.
Mr. COX. "Mr. Burns says that we cannot succeed in holding the Headley and Thompson cases in the Patent Office through interference proceedings, but that if we do not deal, he proposes to file divisional applications on matters covering commercial machines, and that he is sure of being able to issue duminating [sic] dominating patents on the divisionals in spite of anything that we can do."
The next paragraph is the one I wish to call your attention to particularly. "For the purpose of forestalling any such program, we think it would be desirable, if possible, to plant a series of traps for such possible Headley and Thompson divisionals, the traps consisting of new applications to be field [sic] filed to cover the several subect [sic] subject matters which Headley and Thompson seem likely to dominate."
Do you recall that? Is that the incident?
Mr. PARHAM. This particular letter was not written while I was associated with Mr. Brown, but I have seen the letter before in the file. I don't doubt Mr. Brown wrote it. So far as I can now recall, what he suggested was not done. It was just a skirmishing in the case of a fight and a deal.
The CHAIRMAN. Mr. Parham, in this connection perhaps it might be well to point out that the applications to which you refer as having been filed by your company are actually not filed by the company, are they? They are filed by individuals?
Mr. PARHAM. They are filed in the name of the individual in all cases. That is the law. They must be filed in the name of the first inventor.
CORPORATIONS BARRED
AS PATENT APPLICANTS
The CHAIRMAN. I just wanted the record to show at this point that a corporation, as a corporation, may not be an applicant for a patent.
Mr. PARHAM. That is correct, sir.
The CHAIRMAN, Now, how do you choose your applicants, your personal applicants?
Mr. PARHAM. We don't choose our applicants. The applicants choose themselves by being the inventors. If we have doubts as between two of our employees as to which is actually the inventor, we usually call them on the carpet and find out their dates of conception and their various reasons for each asserting that he is the first inventor, and we try to make the correct decision between the two in our Patent Department, and then file an application.
The CHAIRMAN. Do these employees receive any reward in addition to their salaries as employees?
Mr. PARHAM. I believe that there is a reward for men in certain salaried classes, a very small reward, but they are really not the source of our patents as a rule. Our inventions usually come out of our engineers; of course, their salary is based on their probable inventive ability, and they are frequently, or when it is available, offered stock at a low price, employee stock. I myself have been the beneficiary of that to a slight extent.
FILING AN INTERFERENCE
The CHAIRMAN. If it were your desire to file an application for a patent which would constitute an interference with some other application, how would you go about doing it? How would you I choose the applicant in such a case?
Mr. PARHAM. I am not sure I have the question. Will you read it?
(The preceding question was read by the reporter.)
Mr. PARHAM. Well, first of all you would have to assume that I knew about the other man's application, which I probably wouldn't. I might under certain circumstances. If I thought that one of my inventors, or one of the inventors in our own employ, had made the invention earlier than the opposing applicant, I would file an application in his name, seeking interference so that he should have his invention rather than to have the invention belonging to the opposite party. I would not make any different choice as between inventors in our own employ for that purpose. The only controlling issue is to find out who really made the invention in our own organization.
The CHAIRMAN. Do you maintain a staff to watch applications that may be filed in the Patent Office, so that you will keep abreast of the developments?
WATCH ON APPLICATIONS
Mr. PARHAM. No, sir, we cannot follow the applications because they are not public, but we do receive in our office copies of the patents as they come out, and it is the duty of the several assistants in the Patent Department to go through their particular classifications and see if there is anything we should do anything about.
The CHAIRMAN. So one of the functions of your company is to keep in as close as possible touch with every patent that may be issued on any device that could be of possible use in your business?
Mr. PARHAM. I think it is fair to say we do keep up with the patent art as best we can, We think our business depends on it. We have to be up with the procession and a little ahead.
The CHAIRMAN. I understood you were going to offer some documents.
Mr. COX. That is a stipulation of Mr. Arnold's. I will bring that after lunch.
The CHAIRMAN. Judge Davis, do you wish to ask a question?
STEIMER INTERFERENCE
Mr. DAVIS. Mr. Parham, you described a procedure with respect to an application of a certain patent for which application was filed by the inventor in 1910, and which was in process over a long period of time, and I believe you said that your company purchased that patent claim for $2300.
Mr. PARHAM. Yes, sir.
Mr. DAVIS. When did they make that purchase?
Mr. PARHAM. That purchase was made in 1917. The circumstances were these. May I tell you a little more completely. We learned of this application by reason of being in interference with our own application, and we found that it had certain features that we thought we needed.
Mr. DAVIS. When you learned of this application for a patent, someone representing your company filed an interference?
Mr. PARHAM. No, sir, we did not file an interference. Only the Patent Office can declare the interference.
Mr. DAVIS. I understand that.
Mr. PARHAM. We made no effort to get the interference. It was declared and there we were. That was the first we knew of the Steimer application.
Mr. DAVIS. And no effort was made on the part of any one representing your company to get it placed in interference?
Mr. PARHAM. No, sir, no effort was made to interfere.
Mr. DAVIS. Was this inventor identified with some other glass company, or was he a wholly independent inventor?
Mr. PARHAM. He was a worker in glass, but not identified with any particular glass company; that is, he was not under any contract or agreement with any other company to transfer his inventions. He was an independent who had thought up this scheme and filed his own application.
Mr. DAVIS. And was not in the employ at the time of some other glass company?
Mr. PARHAM. He may have been actually working for some other glass company, but he was not inventing on the time of that company. It was an independent invention of his own, as I have understood it, sir. That was back a little before my time and I was speaking of these early proceedings from the record.
Mr. DAVIS. I believe you have agreements with all of your employees under which any inventions developed by them belong to the company.
Mr. PARHAM. Any invention in our particular field of glass.
The CHAIRMAN. If there are no other questions, the committee will stand adjourned.
(Whereupon, at 12:15 noon, a recess was taken until 2 p. m. of the same day.)
AFTER RECESS
The committee resumed at 2:10 p. m. on the expiration of the recess.
The CHAIRMAN. The meeting will please come to order. Are you ready to proceed, Mr. Cox?
Mr. COX. I am, Mr. Chairman. I have finished with Mr. Parham for the time being, at least, if the committee has no questions.
The CHAIRMAN, Do any of the members of the committee desire to ask Mr. Parham any questions?
Senator BORAH. I wish you would explain so a layman can understand it what is meant by "fencing in.
"TESTIMONY OF SIDNEY F.
PARHAM, PATENT ATTORNEY,
HARTFORD EMPIRE COMPANY,
HARTFORD, CONN — (Resumed).
Mr. PARHAM. Well, fencing in, as I think that term has been used and in a way I think a layman would understand it, means that from a patent sense you try to get not just the particular piece of machinery covered with a patent claim but a certain zone around that particular machine which you speak of as being fenced in as your property, and the other fellow fenced out. At least that is the way I would understand it. That means that if you have a broad claim by itself it may fence in, or you may fence in by half a dozen narrower claims of different types.
Senator BORAH. So that the enemy can't spread out too much?
Mr. PARHAM. So that the enemy can't break into your own little patented preserves, is the way I would understand the term.
Senator BORAH. That is all I desire to ask at the present. He will be back, I suppose.
Senator KING. In any of those proceedings in the Patent Office in which your organization was interested did it pursue any course that might be denominated one of delay for the purpose of preventing a speedy consideration and determination of applications that were filed?
DENIAL OF DELAYS
Mr. PARHAM. Speaking of the interference proceedings with relation to feeders that we were speaking of today, I think I can only generally answer that we did not delay. We had every urge on the contrary to hasten things, because we were trying to do business without our patents. On the other hand, to be perfectly candid I do know of one instance in which we were being more or less threatened with a very serious patent coming out on forming machines, in which we slightly delayed the issuance until we could make a trade with the man that owned the other patent. That is the only one I recall at the moment.
Senator KING. Coming to that instance where so many years elapsed from the filing of the application until the matter was finally determined in the Circuit Court of Appeals, did your organization take any steps to delay proceedings either in the Patent Office or in any of the courts?
Mr. PARHAM. None that I recall, sir, unless you call the compliance with the almost mandatory rule of the Patent Office to make motions adding such other issues to the interference as you may need to avoid estoppals [sic] estoppels. That is mandatory, or you lose your rights. We made such motions in some of those cases, as I recall them now.
Senator KING. Were you interested in securing patents at the earliest date possible?
Mr. PARHAM. We were, sir, because we had our commercial machines out in large number; we had licensees who had taken our word that we were going to have patents and they had gone into business on that faith, and we had to make good, so to speak. We were being held up in those interferences and we desired more than anything else to get at least some of our basic patents out so we could protect that situation.
PATENT INTERFERENCES
Senator KING. While this may not be germane to the testimony which has been given, interference matters have been referred to, and this long case has been alluded to, what suggestion would you care to make as a patent lawyer to expedite matters and to prevent such long delays so that the patent, the application for which was made ten or fifteen or twenty or twenty-five years ago, will not expire until 1940?
Mr. PARHAM. I have some very decided opinions on those, entirely personal opinions as a patent lawyer rather than as a representative of the company. I think the interference practice can be greatly shortened by doing away with certain of the interlocutory appeals. At the present time there is a series of appeals allowed on motions within the Department. I think you can greatly shorten the time by having in the Patent Office, or connected with the Patent Office, say regional judges or examiners of interference, before whom you take your testimony and argue your cases as in open court.
We now have a deposition practice which is very long drawn out. After the decision of one of those judges, I would like to see a single appeal to a single Patent Appellate Court. I believe in a single court for patents to have that jurisdiction as well as the jurisdiction in infringement cases. These are my personal ideas.
Senator KING. Speaking only for myself, it seems to me that those who are interested in obtaining patents and believe in the limited monopoly which the patent gives ought to be willing to and should contribute to some plan under the terms of which the application for patents may be speedily determined because, if we are to delay those matters for ten or fifteen or twenty or twenty-five years, there will be a demand, in my opinion, for very radical modification of the patent laws.
Mr. PARHAM. I am entirely in accordance with that opinion, Senator, and I am very glad to do what little I can to help that.
Mr. ARNOLD. Your own definition of fencing in is not, then, that given in the memorandum entitled. "Memorandum on Policy of Hartford-Empire Company," which reads as follows: "To secure patents on possible improvements of competing machines so as to fence in those and prevent their reaching an improved stage." (Exhibit No. 124, Page 211.) You wouldn't agree with that?
DEFINITION OF FENCING
Mr. PARHAM. That is not exactly my idea of fencing in. I already have explained this morning, or tried to explain, that in the position in which we have found ourselves we have considered it good policy (I personally think it is sound policy) to try to develop along every possible avenue to get the best result we can for our licensees.
Now, if we do that it means that we take a view of the competitor's machine, we see if it can be improved up to a point where it will be worth competition for our machine. If we can make that improvement and get the patent on it, we block off the other fellow, or fence him out. We don't necessarily fence him in; we fence him out really of that particular improvement, but while we are doing it we, ourselves, are improving the art, and if we succeed in making that machine better than our own machine, we have got that available to put out.
Mr. ARNOLD. Then I take it there is a conflict between the written contemporaneous memorandum which we have introduced and your present definition of the policy?
Mr. PARHAM. Well, of course, sir, this is not my definition in the memorandum. It was written by Mr. Knox Smith.
The CHAIRMAN. That is a good definition of fencing in, is it not?
Mr. PARHAM. I personally like my definition much better. Mr. Knox Smith liked the other point of view. I have a great respect for his opinion.
The CHAIRMAN. You are like the man with the basic patent — you cover a good deal more of the field than he.
Mr. PARHAM. I really don't think I do. I place a different emphasis on the words than the Committee place on them. To me the idea is one of doing something positive in the way of development, rather than the negative thing, of cutting the other fellow out. Now you may incidentally cut the other fellow out.
The CHAIRMAN. The two things are the identical. It is the reverse and the obverse of the same method, isn't it?
Mr. PARHAM. Yes, you can put it that way, but I prefer the positive side.
The CHAIRMAN. It is a nicer way of stating the same thing.
Mr. PARHAM. And I think it is a more exact way than to apply it to us.
Senator BORAH. Both propositions accomplish the same end.
Mr. PARHAM. Yes, they may accomplish the same end except I don't know how to block out anybody by doing nothing.
Senator KING. Each competitor is trying to improve, if he is in the business to succeed, trying to improve his mechanism and his art and to that extent he is trying to block out his competitor, and each competitor is working against the other fellow for the purpose of blocking out or getting the best in the art, so that he may get the trade. If he doesn't improve, some other organization may get the trade away from him, so there is constant rivalry between the competitors.
Mr. PARHAM. Yes, sir.
Senator BORAH. It is not always for the purpose of approving. It is sometimes for the purpose of preventing somebody else from doing something, isn't it?
Mr. PARHAM. I have never been conscious we have been proceeding along that line, if you are applying it to us.
Senator BORAH. I am not speaking of your particular company. What I want to know is about fencing in in general, how it is used by other companies. It is often used for the purpose of preventing some-body from developing their field, isn't it?
Mr. PARHAM. I would say if someone starts out to block someone else, if they try to make an invention, all they are trying to do is to make some money on that, and they sell it to the other fellow and he can use it if he succeeds in getting an improvement that is worth anything. If it is not worth anything you don't have to use it, so the thing finds its own place in the economic structure, as I see it.
Senator BORAH. I judge from the letter of Mr. Brown today that there are times when it is looking to individual interests.
Mr. PARHAM. As I explained this morning, that was one of the suggestions, as I understood it, in the course of a rough-and-tumble in which we were trying to get to a point where we could make a contract to obtain these rights we were afraid we would need in order to carryon our purpose. That is a little unfortunately expressed.
Mr. ARNOLD. Would it be correct to say, to summarize your statement, that they were, of course, in your organization primarily interested solely in making money; they always lost out in favor of the more humanitarian policy?
Mr. PARHAM. Oh, I couldn't say that.
Mr. ARNOLD. Generally, I will say.
Mr. PARHAM. No, I wouldn't say that. Mr. Smith testified yesterday, and I agree with him, we are not a charitable organization.
Mr. ARNOLD. The question was argumentative so I won't ask you to answer it.
COMPETITION IN PATENT FIELD
Mr. COX. Two questions have been raised by the Committee which I should like to ask a question about, if I may. In response to Senator King's and Senator Borah's questions I got the impression that you were suggesting that in so far as this fencing in process is carried on, it is carried on as a part of a competitive contest between people in the same line of business.
Mr. PARHAM. I think that is what it usually is, if you are speaking of it generally, yes. Each fellow is trying to get the biggest place in the sun.
Mr. COX. Is that the situation today with respect to your company so far as it carries on the fencing in process?
Mr. PARHAM. In so far as you say we are carrying it on. I don't like the word the way you use it, but never-the-less what we are doing is trying to maintain our position at the top of the pile so that we can pass on to our licensees better machinery, keep them right up to snuff, and incidentally make money for ourselves.
Mr. COX. You are in the business of developing and perfecting glass making machinery, obtaning [sic] obtaining patents on that, and licensing people under the patents, is that correct?
Mr. PARHAM. We are in that business and in the business of servicing and repairing. We give advice about other machinery.
Mr. COX. Take the business of developing experimental work for obtaining patents on glass making machinery and licensing under those patents, what other companies are in that who are your competitors?
Mr. PARHAM. My competitors may be, first of all, the builders of the Owens suction machine, I mean the more improved machine. As I told you before, the old patents are out.
Mr. COX. That is the Owens Company.
GLASS "FEEDING" MACHINES
Mr. PARHAM. If you are speaking of the feeding and forming end. I think Mr. Peiler has prepared a list for you of certain people that make forming machines and supply them to the trade. There is quite a list of them, some seven or eight people.
Mr. COX. What about feeding ma-chines? Who makes those and supplies them to the trade?
Mr. PARHAM. I think most of the people that make the stream feed now make them for themselves the people that use them. I am not certain of that. I think all of those matters are on those lists that you asked Mr. Peiler to prepare.
Mr. COX. I wasn't aware we had asked for that. Mr. PARHAM. You asked for a list of those competing machines and competing processes. Mr. COX. Is there anyone else who is in the business in this country today, that you are in?
Mr. PARHAM. Do you mean in the whole business or in the business as to tanks, in the business as to things separate? There are a number of people in tanks.
THE GLASS INDUSTRY
Mr. COX. Take first the whole business.
Mr. PARHAM. I think that several of the larger glass companies carry on the complete line of development. The Hazel-Atlas Glass Company and the Owens Company I understand have very extensive experiments and development work done in connection with their own business and their own machines, on their own processes.
Now individually, if you get down to the question of tanks, I would say we are not a competitor yet. We have had a lot of ideas. We haven't licensed any tanks of our own yet. We hope we are going to have a better one in the near future, and there are a number of people that make those. It is quite a competitive field.
Mr. COX. You haven't done much in the tank field?
Mr. PARHAM. We have done a lot of cutting and trying over the last seven years, it has cost a lot of money, but we haven't got any money back.
PATENTS ON LEHRS
Mr. COX. You haven't started the commercial exploitation?
Mr. PARHAM. No, that isn't out commercially yet. On the question of lehrs, there are I think some eight or ten companies that are making lehrs of one kind or another.
Mr. COX. They are making them under your patents?
Mr. PARHAM. There are two companies that have made them under our patents. One of them is not making them under our patents now. There are a number that are making lehrs outside of our patents. There is a company they have alleged infringed our patents and we have a recent holding of the Court of Appeals that they did infringe our patents. There are other companies that are making kinds of lehrs that differ from ours and are not covered by our patents and which are still used.
Mr. COX. I want to come back, Mr. Parham, to a question I asked in the first place, which is whether there is any other company in the country today which is engaged in the business of licensing feeding and forming machines.
Mr. PARHAM. I don't know whether I can fully answer that question. There may be a licensing of the suction machinery which I understand you are clasifying [sic] classifying as a feeder and which I do not classify as a feeder.
Mr. COX. But you feel you can't answer that question?
Mr. PARHAM, No, I think Mr. Peiler can answer all those questions for you just like that, and I can't.
APPLICATION PROCEDURE
Mr. COX. I will leave that matter be-cause we are going to develop some testimony about these people by other witnesses.
I have one other matter and then I will be through.
You spoke in reply to a question by Senator King about the interest which the owner of the application in the Patent Office feels in getting the patent out as rapidly as he can, so that he will have patent protection. Take the situation such as the one you described this morning, where the same man has two patent applications in the Patent Office, one covering substantially the same machines but one narrower in scope than the other. That incentive doesn't exist to the same extent there, does it?
Mr. PARHAM. I can conceive of the case, certainly, where a man might wish to delay a broad application if he has two going in, but it is not always to an applicant's advantage to delay. Frequently it is more to his disadvantage. I am speaking generally.
There are times when the art takes a turn and goes off and leaves him before his patent ever gets out. He is foolish to delay in a case like that. There are other cases in which the cream is taken off his invention by somebody else during the period he is in the Patent Office.
Now there is the other side of the picture. If his monopoly starts later, he may pick up the most profitable period of use of that invention. You can't tell which it is going to be, because you can't tell when the next invention is coming out.
Mr. COX. If he gets his narrow patent first and his broad patent later, that maybe an economic advantage to him?
Mr. PARHAM. It may be, yes, sir.
Mr. COX. I think I have finished with Mr. Parham.
The CHAIRMAN. Mr. Parham, you maybe excused. We thank you very much.
(The witness was excused.)
The CHAIRMAN. Call the next witness please.
Mr. COX. In view of the nature of some of Mr. Parham's testimony, I should like to call a witness whose testimony will not take more than five minutes, Mr. McAllister.
The CHAIRMAN. Mr. McAllister, do you solemnly swear the testimony you are about to give in this proceeding will be the truth, the whole truth and nothing but the truth, so help you God?
Mr. MCALLISTER. I do.
TESTIMONY OF E. W. McALLISTER,
PITTSBURGH, PA.
Mr. COX. Give the reporter your name and address.
Mr. McALLISTER. E. W. McAllister, Pittsburgh, Pennsylvania, and I am a lawyer.
Mr. COX. Will you tell us now what your qualifications are particularly with respect to patent law? Mr. MCALLISTER. I am a graduate engineer; I am also a graduate of Cincinnati Law School. I practiced law in Cincinnati, and specialized in patents all my law practice I have always specialized in patent, trade-mark and allied lines. I spent a number of years with the Westinghouse Company at East Pittsburgh, and for the last twenty years I have been practicing general patent law in the City of Pittsburgh.
Mr. COX. Have you had any experience with patents relating to glass machinery, Mr. McAllister, and if so, will you tell us briefly what it is?
Mr. McALLISTER. Yes, I have represented a number of defendants in the litigations that you have heard of this morning. I was in one of the earliest glass cases brought by the Hartford-Fairmont Company at that time against the United States Glass Company, and I have also been counsel and of counsel in other cases.
Mr. COX. Now I am going to show you two of the patents which we discussed this morning, the one patent 572 which we referred to as the heated hood patent, and the other 571 which I think we referred to as the Steimer patent, and I ask you whether you have any familiarity with those patents, whether you have had any experience in connection with them, and if so, if you will tell us what it is very briefly.
Mr. McALLISTER. Yes, some years ago and before these applications matured into patents, I assisted the then solicitor in the Patent Office in the attempt to avoid having the Commissioner issue these patents. You have heard of the suit this morning under 4915. I helped the Commissioner, or rather the Solicitor of Patents, in that case, in an effort to resist the outcome of the case.
The CHAIRMAN. By that you mean the issuance of the patent?
Mr. MCALLISTER. The issuance of the patent, yes, sir.
Mr. COX. Now, Mr. McAllister, will you look at Claim 5 of the claim of the Steimer patent, read it into the record, and tell us briefly as you can what in your opinion is the scope of that claim of the patent so far as it applies to the glassmaking machines?
THE STEIMER PATENT
Mr. McALLISTER. I am reading from Steimer patent 207,571, which issued March 9, 1937. Claim 5 reads as follows:
"The method of forming masses of molten glass that comprises cutting glass to flow from a parent body through an opening, causing successive portions of glass, as they emerge from said opening, to hang freely below the opening, and then detaching said successive portions of glass before they are received in any receptacle."
This is a broader claim than any that had theretofore issued to the Hartford-Empire Company or their predecessor, the Hartford-Fairmont Company. In my opinion it broadly defines the procedure of suspended gob feeding, or as it is some-times called, suspended charge feeding; that is, the procedure of making mold charges which is carried forward by the Hartford-Empire feeders here under consideration. It is of such scope that it involves also producing mold charges where the molten glass flows through an opening and is cut into mold charges while still in suspension.
THE PEILER PATENT
Mr. COX. Well now, will you look at Claim 30 of the so-called heated hood patent and do the same for that, Mr. McAllister?
Mr. McALLISTER. By heated hood patent I assume you mean Peiler patent 273572, which issued March 9, 1937. Claim 30 of that patent reads as follows:
"The method of delivering gathers off used glass from a molten furnace, melting container, or the like through a submerged outlet orifice, said method comprising the steps of maintaining the temperature of glass to be fed through the outlet, adequately low to preclude the direct formation of freely flowing glass current and to maintain such a state of viscosity in the glass that a volume of glass roughly corresponding to the gather to be delivered, collected by the outlet of the melting furnace, container or the like, is allowed to hang down an adapter to be cut off before such gather breaks or continues flowing, the severing of such gather by mechanical shears close to cut through the glass and blow out of smearing relation with the outlet, while said gather hangs down and before it continues flowing."
Claim 30 that I have just read is also a very broad claim. It is addressed to a procedure involved by the Hartford-Empire feeders here under consideration, and in my opinion is fundamental in so far as that procedure is concerned. It is addressed to a little different angle of the procedure than is defined by Claim 5, of Steimer, in that it involves temperature maintenance of the molten glass during the feeding operation, and it also specifically involves the use of mechanical shears for accomplishing the severance of the molten stream of glass in the mold charges while such glass is suspended from a glass submerged in the orifice.
Senator KING. I understand what you have just read is your own language.
Mr. MCALLISTER. Yes. I should have said, "end of quotation."
Mr. COX. Mr. McAllister, taking those two claims together, I wonder if you would state shortly for us what is your opinion as to the scope of those patents, so far as they apply to the machines in use today.
THE TWO CLAIMS
Mr. MCALLISTER. Well , these two claims, whether they are contrasted or whether they are taken together, are very broad claims. You noticed the Claim 30, that I read, involves no implement extending into or above the glass. This claim is therefore broad enough to cover, I believe, a form of feeding which has been referred to as the old "flow" feed, provided the cutting into mold charges is accomplished by shears located, of course, below the orifice.
Mr. COX. Mr. McAllister, it was testified to this morning that that flow feed method of feeding glass was in use in some places commercially. Do you know whether in any of the places where it is in use shears are close enough to the orifice so that that method falls within the claims that you have mentioned?
Mr. MCALLISTER. Yes, I have seen it operating at Ball Brothers, and I am quite sure the claim would cover that procedure.
Mr. COX. I have finished with Mr. McAllister.
Representative SUMNERS. Mr. McAllister, what are you reading from?
Mr. MCALLISTER. I read from the patents first, and then I read from my own notes, because I knew what I was going to be asked.
The CHAIRMAN. You described the Steimer patent first, did you not? That was the patent that was issued in 1927 or 1928?
Mr. MCALLISTER. In 1937, on an application which was filed in 1910.
The CHAIRMAN. It was issued in 1937; the application was filed in 1910.
BASIC PATENT
The CHAIRMAN. It appears to be a very basic patent.
Mr. MCALLISTER. In my opinion it is, sir, yes.
The CHAIRMAN. Well, was the method there described in this patent of 1937 used in the industry prior to the issuance of the patent?
Mr. MCALLISTER. Oh, yes.
The CHAIRMAN. For how long a period?
Mr. MCALLISTER. To my own knowledge, seventeen years.
The CHAIRMAN. By whom was it used?
Mr. MCALLISTER. This United States Glass Case that I spoke of was predicated on just such a use by the United States Glass Company.
The CHAIRMAN. By whom else was it used?
Mr. MCALLISTER. Well, the Berney-Bond Company which sued at that time. They were using a feeder which operated within the broad terms defined by the claim which he read from the Steimer Company.
The CHAIRMAN. By whom is it used now?
Mr. MCALLISTER. I believe all glass manufacturers, and particularly those making the so-called containers that have been discussed in this here.
The CHAIRMAN. But under license now from Hartford-Empire?
Mr. MCALLISTER. So I understand, sir, yes.
Representative SUMNERS. May I ask a question? You say this process was used seventeen years before the patent was issued to which you refer. The people who were using the process, were they using that under a prior patent?
Mr. MCALLISTER. No, your Honor, I don't like to be pedagogical, but I think from what I have heard there has been a little misunderstanding here.
Representative SUMNERS (interposing.) That is what I am trying to get straightened out. Somebody was using this patent seventeen years — I mean, using the process seventeen years before the patent was issued, if I understood your statement.
Mr. MCALLISTER. Yes, that is right.
THE U. S. GLASS COMPANY
Representative SUMNERS. Now, the people who were using the process seventeen years before the patent was issued, were they operating under a patent?
Mr. MCALLISTER. They may have been. The United States Glass, which was my client Representative SUMNERS (interposing). Now, you don't know whether they were or not.
Mr. MCALLISTER. If you will just give me a chance. I will answer you. The United States Glass, my client, were operating under a so-called Miller patent. It involved these same operations accomplished by a plunger, and also was called a blow-back.
Representative SUMNERS. I know, but you are a patent man and I am not. What I want to know is, were the people operating under a patent who were using the process. Can't you answer?
Mr. MCALLISTER. I have answered, yes.
Representative SUMNERS. Now, then, were they precluded by the later patent to continue to use the process that they had been using seventeen years before?
Mr. McALLISTER. They would be subject to suit if that is what you mean by precluding.
Representative SUMNERS. I mean a successful suit. I know anybody can sue you, but I mean a successful suit.
Mr. [spell:McALISTER,McALLISTER]. You are asking me to pass upon the validity of the claim I have just read to you?
Representative SUMNERS. I am just hoping you can help us; I am not asking you to do anything.
Mr. McALLISTER. The only answer I can give you, sir, is this: That these claims give an apparently broad protection to the Hartford-Empire Company.
Representative SUMNERS. I understood that.
Mr. McALLISTER. That protection, of course, the courts will determine as to whether or not that protection is proper protection by determining whether or not the claims that I have read to you are valid claims.
Representative SUMNERS. May I ask you another question, if you don't mind. Were the people who were operating under this process seventeen years before the issuance of the patent sued for any reason. Were suits brought against them or did they quit using the old process? What happened when the new patent was issued?
Mr. McALLISTER. When it was issued in 1937 all the people that were then operating, except the three and one other — the United States Glass should also be included in the three to the right hand of that chart (indicating) — were licensees under the Hartford-Empire Company. The United States Glass Company is incidentally still operating even in the face of these two patents that I have read.
Representative SUMNERS. Thank you, sir.
Senator KING. I understand there is a controversy between the company which you represent as a lawyer and the Hartford Empire Company, and your company was defeated.
Mr. McALLISTER. No, sir, that is one of the cases that was won.
Senator KING. Well, were you operating under this patent-was your client operating under the patent or under any patent? If so, to whom was it issued?
Mr. MCALLISTER. May I make a suggestion?
Senator KING. No, answer that question . Was your client operating under a patent?
Mr. MCALLISTER. The United States Glass Company, as I answered just a minute ago, was operating under a so-called Miller Patent which covered a machine, and I think also a procedure for forming suspended mould gobs under the action of a reciprocating plunger and what I have termed a blow back."
THE MILLER PATENT
Senator KING. Then there was a controversy between your company and the Hartford Company, you contending that they were infringing the Miller Patent, or they contending that you were infringing their patent?
Mr. MCALLISTER. Yes, the Miller Patent never came into the controversy.
Senator KING. I am not interested in that controversy; I am only trying to find out whether there was a controversy between your company and the Hartford-Empire Company.
Mr. MCALLISTER. Well, there was this —
Senator KING (interposing). Was there that controversy?
Mr. McALLISTER. Certainly, there was the suit.
Senator KING. Now, why were you interested in going to the solicitor? Why were you interested, and did you think that it was ethical (I am not making any comment one way or the other) in going to the Solicitor of the Patent Office and trying to prevail upon him not to issue a patent or to approve of an application?
Mr. McALLISTER. Well, you misunderstood me absolutely and entirely, sir. Let me explain that again.
Senator KING (interposing). Did you go to him?
Mr. McALLISTER. Yes, yes; but that was long after the United States Glass Company case. The United States Glass suit was filed and tried in 1920 and 1921. Senator KING. Well, what was it that you were trying to prevent the Solicitor from approving?
Mr. McALLISTER. If you will just wait a minute.
Senator KING (interposing). What was it? You can answer that. Was it an application for a patent and, if so, by whom?
Mr. McALLISTER . The Hartford-Empire Company had sued the Commissioner under 4915 to compel him to issue the two patents to which I have referred. Now, of course, all suits in the Federal Courts become public property.
Senator KING (interposing). Oh, we are all familiar with that.
Mr. McALLISTER. And that is how I knew about it, and in an attempt to protect a client at that time against the issuance of what I believed to be improper patents, I asked — I think his name was Hostetter — if I could give him any help in connection with briefing his case before the Supreme Court of the District. He gladly accepted my help and I briefed the case for him.
PEILER PATENT CONTENTIONS
Senator KING (interposing). I am not interested in that. I am just trying to find out what the controversy was and did the courts finally determine the validity of a patent. Reference was made by one of the witnesses today or yesterday that the case went to the Circuit Court of Appeals here and that overruled the District Court and affirmed the validity of the patent. It that the patent to which you are referring?
Mr. McALLISTER . Yes, your Honor, but the court did not confirm the validity of the patent. That was a case of 4915 against the Commissioner and —
Senator KING (interposing). Requiring the Commissioner to issue the patent?
Mr. McALLISTER. Yes, yes, that is it, and these two patents resulted.
Senator KING. So there is a controversy between you as a lawyer and the lawyer of the other company as to who had priority under these patents?
Mr. McALLISTER. No , I have no controversy with anybody as to who has priority.
Senator KING. Well, you claim the priority, do you, for your company?
Mr. McALLISTER. No, I do not. We were contending that the Peiler — in the briefs that I wrote and in the controversy that you refer to between this Commissioner of Patents and the Hartford-Empire Company, the Patent Office had already held that the basic claims, those that I have read to you, were not patent-able claims. His suit was to compel the Commissioner to issue the patent with those claims in it. Now I was taking the side of the Commissioner and the Patent Office and I were agreeing that they were not patentable claims, but I had no controversy as between a client of mine and the Hartford-Empire Company.
Senator KING. As I understand it, there is no controversy between you and your client and the Hartford Company.
Mr. MCALLISTER. No.
Senator KING. You are all harmonious?
Mr. McALLISTER. Well , I suppose I can't answer that yes. That is a pretty big word because there are very few of us that are harmonious with anybody else.
Senator KING. Are you here for the purpose of indicating that the Hartford Company has not infringed upon your client and here in its defense or in its favor or what?
Mr. COX. I feel in favor to the witness I should make a preliminary answer to that question. The primary reason he is here is we subpoenaed him and he came under legal pressure.
Mr. McALLISTER. I might also add that they had a lot of my letters and if I hadn't testified this way, they would have read to me out of my letters. (Laughter)
Senator KING. That is all.
The CHAIRMAN. Have you finished with the witness?
Mr. COX. Yes. I think I should say in relation to the statement that the witness made in respect to the chart, it is our understanding that the United States Glass Company, which he said should be up there, does not now produce glass containers.
Mr. McALLISTER. Maybe not, just tumblers and pressed ware.
Mr. COX. And that is the reason why that company is not on that chart.
Senator BORAH. I want to ask the witness a question. I think you need not return. You have been in the patent practice a long time. What do you understand by the term "fencing"? Have you ever indulged in it?
Mr. McALLISTER. I think the patent lawyers have used that term for a number of years. I don't mean to say there is any definite significance to the term. I, myself. have always thought of it as building a paling fence around an invention. Now, I think of an invention as an entity and an improvement is also an invention — it is an entity. If I have an invention of any sort, to fence in that invention I or my colleagues try to figure out as many ways of accomplishing the same or substantially the same result, and then we patent those, and as a result we have instead of one patent a number, all bearing on the same subject matter, and we call that building a paling fence around it, or as you have termed it, fencing-in.
PATENT PROTECTION
Senator BORAH. In other words, if you have a patent, you undertake to surround that by other inventions, as nearly as practical, so as to confine it within a certain limited area.
Mr. McALLISTER. Well, I wouldn't say confine it, but so as to make your protection of the general idea as broad as possible. You see, when you are talking or thinking of building a paling fence around something or fencing it in, you are thinking of confining, yes, but the patent attorney's idea is to get as many patents on the general idea as he can for the purpose of widening out the scope of his patent protection. Is that clear?
Senator BORAH. I understand what it meant to fence in cattle and horses, and so on, and I assumed that you were trying to limit the operation of a particular patent by patenting other ideas as near to it as you could get them without infringing.
Mr. McALLISTER. That would not be my idea, sir, and very often, and I think most often, the patent attorney who is working for a client than can afford to take out a number of patents is merely thinking of the scope of the protection that he can get. Now he may have nobody else's invention in mind, he may know of no one else's invention, and in ninety-nine cases out of one hundred that would be the case.
Senator BORAH. But I am speaking now of a person who wants to deal with another person who has a patent. They have spoken here about fencing in this or that patent belonging to someone else than those who are doing the fencing.
Mr. McALLISTER. The term could be used in that way. I never so used it. But under those circumstances you would undoubtedly have to know the subject matter of the adversely owned patent, and then you, yourself, and those colleagues who have inventive turns of mind, would direct their energies, their inventive energies, if you can consider invention as an energy — they would direct their inventive energies toward that particular thing covered by the adversely owned patent, with the hope of building patents around it, and therefore overlaying or at least overlapping such field of invention as the ad-verse owner of the patent might also think of.
Representative SUMNERS. He couldn't expand?
Mr. McALLISTER. No, you are trying to prevent his expansion by really foreseeing the field that he would expand into, and covering that field. It is just exactly, Senator, as if we were staking out claims around a gold mine. Now you hurry out to the productive claim and you stake out claims around that gold mine, and in that way prevent the owner of the productive claim from expanding to the adjacent claims.
Senator BORAH. I understand that now, but I want to read the statement here to which I was referring when I asked the question in the first instance. It says that the main purpose of securing patents is this:
"In taking out patents we have three main purposes: (a) to cover the actual machines which we are putting out, and prevent duplication of them. The great bulk of our income results from patents. Between a feeder protected by patents, and one not so protected , there is the cash difference between one ordinary manufacturing profit of say $1,500, and a royalty return of at least $30,000 over eight years; (b) to block the development of machines which might be constructed by others for the same purpose as our machines, using alternative means."
Now the fencing in process comes in there, doesn't it?
Mr. McALLISTER. That would be what I just referred to, staking out your claims around the productive mine with the idea, or, from the standpoint of a patent, it seems to me that you would be trying to foresee the possible expansion or the possible improvements that might be made on the invention covered by the adversely owned patent, and in that way block the adverse owner of the patent from taking out improvement patents.
Senator BORAH. "(c) To secure patents on possible improvements of competing machines, so as to fence in those and prevent their reaching an improved stage."
Mr. McALLISTER. Of course, I think that would be an impossible thing for anybody to do. I have heard that letter read several times this morning, and I think the man who wrote it must have been an optimist, because we can't — nobody can foresee what somebody else is going to invent. Now he can only try to out-invent the other man, but that is all he can do.
Senator BORAH. It says "to secure patents on possible improvements of competing machines." Now if you have in mind a competing machine, you undertake to determine what are the possible improvements which may be made to limit the operation of that machine.
Mr. McALLISTER. Not to limit, no, but you try to foresee what the possible improvements on that machine would be to make it a better commercial machine, and then you try to patent those improvements in order to prevent the owner of the patent from getting patents on those improvements.
Senator BORAH. From developing his patent?
Mr. McALLISTER. Yes, from developing his patent. Now as I say, the man who wrote that letter must have been an optimist, because it would be just hit or miss. No two men invent the same way, just as no two men think the same way.
"FENCING" AS A DEFENSE
Mr. ARNOLD. Could you put it this way: This fencing in process can be used as a defense against others, as was testified in the General Motors hearing, or as an offense by which you attack others, as there has at least been some testimony here, and that the defensive method is a whole lot easier to defend as a matter of public policy than the offensive method.
Mr. McALLISTER. Well, I don't know that public policy enters into it. I think that every patent lawyer in this country has been guilty at one time or another of trying to do both.
Mr. ARNOLD . I wasn't speaking of patent lawyers, because I conceive they must represent their clients and give the best benefit of the law as is. I was only speaking of the public policy of the law itself.
Mr. MCcourselves and for our clients. Therefore, I don't see public policy in it at all.
THE AUTOMOBILE POLICY
Mr. ARNOLD. You don't see a difference in policy between the automobile situation in patents and the Hartford-Empire situation?
Mr. McALLISTER. Both are operating under the law.
Mr. ARNOLD. But isn't there a difference in policy?
Mr. McALLISTER. There is a difference in policy, that is very clear, but they are both operating under the law and I don't see why I should be called upon to make a distinction of the morals in the situation.
Mr. ARNOLD. I wasn't calling on you for morals; it was simply a question of economic policy. However, I withdraw the question.
The CHAIRMAN. As I understand the description which you have given us, Mr. McAllister, it may be stated briefly this way: Just as a typical case, let us assume there are two machines, A and B, which perform generally the same function and serve generally the same purpose but are covered by different patents.
The owner of A, under the system which has been described here from the beginning of these hearings, and the owner of B, each undertakes to study the effect not only of his own patent but of the competing patent, and if his research laboratory is sufficiently able and his lawyers are sufficiently able he will endeavor to study the improvements which the other competing patents are susceptible of, and secure the patents upon them in order to prevent the holder of the other patent from expanding his business without first dealing or obtaining a license from the other man.
Mr. McALLISTER. That is exactly right. I tried to state the same thing.
The CHAIRMAN. And that is the process of fencing in.
Mr. McALLISTER. That is one process of fencing in. The other is to fence in your own invention.
The CHAIRMAN. And that was the process of fencing in which was described in this very clear memorandum from which Senator Borah was reading, and it has been practiced in industry generally.
Mr. MCALLISTER. Oh, I think so.
Representative SUMNERS. One reason you fence your own in is to keep the other fellow from running a fence first.
Mr. McALLISTER. It is just exactly like staking out a lot of claims in a goldfield.
The CHAIRMAN. Or fencing in a water hole on a ranch.
Mr. McALLISTER. That's right.
Senator KING. Senator O'Mahoney referred to A and B, each of whom had a patent, and each of whom tried to fence in by adopting such protective measures as he deemed proper, by finding what improvements, through his research laboratory, he might feel necessary.
Suppose there is not a B, but there is just an A. Would not the A try to fence in by watching the development of the art and the development of the industry, and if he thought that his machine, though perhaps it was the best and most effective any in operation, might some day be superseded by some other company not even in existence, would he not try to make improvements upon the machine which he had?
Mr. McALLISTER. Oh, yes; and that is done every day.
FEAR OF COMPETITION
Senator KING. Are any of the great inventions and those who have them satisfied with them and regard the inventions as perfect even though they have no competition, and they are trying to improve them, anticipating that through technological development, the arts and sciences, some day somebody will beat them to the market and get the market away from them unless they make improved equipment?
Mr. McALLISTER. I spoke of being with the Westinghouse Company. At the time I was there the steam turbine was being developed. There were two lines of development, one by the Westinghouse and one by the General Electric Company, and each of our companies was doing just exactly this fencing in from both standpoints. We were trying to broaden out our own protection and we were trying to prevent developments along the line of the other turbine by patenting what we thought would be the probable commercial developments of the other turbine.
Senator BORAH. Did you ever represent a client who had been fenced in?
Mr. McALLISTER. I shouldn't wonder.
The CHAIRMAN. Are there any other questions? Thank you, Mr. McAllister.
(The witness was excused.)
Will you call the next witness, Mr. Cox?
Mr. COX. Mr. Levis.
The CHAIRMAN. Do you solemnly swear that the testimony you are about to give in this proceeding shall be the truth, the whole truth and nothing but the truth, so help you God?
Mr. LEVIS. Yes, sir.
TESTIMONY OF WILLIAM E.
LEVIS, PRESIDENT, OWENS-
ILLINOIS GLASS COMPANY,
TOLEDO, OHIO.
Mr. COX. Mr. Levis, will you give the reporter your name, [spell:addres,address], and occupation?
Mr. LEVIS. William E. Levis. I am president of the Owens-Illinois Glass Company. My address is 2104 Parkwood, Toledo, O.
OWENS-ILLINOIS GLASS CO.
Mr. COX. Will you tell us now briefly. Mr. Levis, what the nature of the business of the Owens-Illinois Glass Company is?
Mr. LEVIS. The Owens-Illinois Glass Company manufactures glass containers, tumblers, tableware through a subsidiary, the Libby Glass Company; it manufactures tin containers through the Owens-Illinois Can Company; it manufactures glass brick and insulators through a division called the Insulux Products Division. It also has a subsidiary on the Pacific Coast called the Owens-Illinois Pacific Coast Company, which manufactures glass containers west of the Rocky Mountains.
Mr. COX. Considering glass containers for the moment, Mr. Levis , does it manufacture a full line of glass containers? By that I mean all different types.
Mr. LEVIS. It manufactures all known types.
Mr. COX. Just give us some idea of the size of your company, Mr. Levis. Can you tell us what the balance sheet assets were as of the close of business in the end of 1937?
Mr. LEVIS. I have it for October 31 of this year. I jotted it down.
The CHAIRMAN. How long have you been president of the company?
Mr. LEVIS. Since January, 1930, sir.
Mr. COX. I am going into some of that history.
Mr. LEVIS. The capital and surplus, net worth, of the company on October 31 of this year was $63,866,000.
COMPANY'S OUTPUT
Mr. COX. Your company, as compared with other companies, is rather a large producer of glass containers, isn't it, Mr. Levis?
Mr. LEVIS. Yes, sir.
Mr. COX. In fact it is the largest, and produces about 38 or 39 per cent of the total?
Mr. LEVIS. That is about 35 per cent for the company east of the mountains.
Mr. COX. What figure would we get if we put in the company west of the mountains?
Mr. LEVIS. About 38.
Mr. COX. If you take the two of them together.
Mr. LEVIS. If you don't mind, I will treat them as one.
Mr. COX. I would prefer to have you do that, Mr. Levis, if you will. It distributes the glass containers nationally, of course, and sells them everywhere?
Mr. LEVIS. Yes.
Mr. COX. Mr. Levis, I don't know whether you have seen the chart that we had marked yesterday.
Mr. LEVIS. I have a copy of that.
COMPANY'S ASSETS
Senator KING. Might I ask a question? I would like to know something about your assets. You have given the sum of $63,000,000. What part of that consists of patents, and what value do you attribute to them? What part of bricks and mortar, to machinery and plant, and what part to cash or liquid assets?
Mr. LEVIS. Our current assets, sir, are about $30,000,000 net; that is, assets after current liabilities, and we have about $79,000,000 in plants with a reserve for depreciation to bring that down to about $48,000,000 net. Our patents are on at their actual cost, I think three or four hundred thousand dollars, which was the cost of securing the patents.
Senator KING. Your liabilities are $30,000,000, did you say?
Mr. LEVIS. No, our net assets.
Mr. COX. Referring again to the chart introduced yesterday in evidence as Exhibit No. 113, (Page 197) I call your attention to those plants which are shown at the end of the lines radiating from the Owens-Illinois Glass Company and I ask you if those are plants which your company operates. Is that correct?
Mr. LEVIS. They are plants which we own, but not plants which we operate.
Mr. COX. There are some there you aren't operating, but you own them all?
Mr. LEVIS. Yes , sir.
Mr. COX. Which ones aren't operating?
PLANTS NOT OPERATING
Mr. LEVIS. Going across the top backwards, that is, down the curve counter-clockwise, we operate the plant at Los Angeles, at Oakland; the Evansville plant hasn't operated in ten years.
Senator KING. Is it obsolete?
Mr. LEVIS. Yes, sir. The Terre Haute plant hasn't operated in the last two or three years.
Senator KING. Obsolete?
Mr. LEVIS. No, sir; it is equipped and could be operated if there were sufficient business. The Chicago Heights plant is a very small operation, a hand-blown plant.
Mr. COX. Perfume bottles?
Mr. LEVIS. Gadgets for bending machines and items of that type. The Glassboro plant was abandoned in 1929 and is now a cap factory, and operating as such. The plant makes plastic and metal closures. The San Francisco plant was abandoned when the Oakland plant was put into operation.
Senator KING. Is that obsolete?
Mr. LEVIS. It has been torn down, sir, and the equipment has been moved to a new factory in Oakland. The Clarksburg plant hasn't operated for fifteen years.
Mr. COX. Is that obsolete?
Mr. LEVIS. Yes, sir; it is dismantled. This is accurate in so far as our published data are concerned: I don't consider the chart in error.
Mr. COX. I am glad to get that statement so we can see what the situation is in each one of those.
Mr. LEVIS. I might volunteer in connection with your discussion today (it means nothing to me) that in a number of these plants we have no Hartford equipment. In other words, if you use those as contrasted to the other side of the page, we have no Hartford equipment in several of these plants. I made these data: Of the seventeen plants, eleven are operative and six of them have Hartford equipment. The others are suction plants, solely.
SUCTION GLASS PATENTS
Representative SUMNERS. Who controls those suction patents?
Mr. LEVIS. Our company did, sir, but I don't think there is much left to them.
Mr. COX. Since that question has been raised, I might ask you when the basic patent, if you recall, on suction machines, ran out.
Mr. LEVIS. I would say we had no very important patents after 1929.
Mr. COX. There are some patents existing today which cover improvements on machines, is that right?
Mr. LEVIS. Yes, sir; and one rather basic patent on the stationary pot.
Mr. COX. The pot revolves now?
Mr. LEVIS. The pot has always revolved, and we hoped that it would stop, but we haven't yet made it stop.
Mr. COX. You can't work that patent?
Mr. LEVIS. We are working it on small machines, but not on large ones.
Senator KING. Did you say eleven of those plants you operated, and six used the Hartford equipment?
Mr. LEVIS. And then only partially, sir. At our Alton plant, the largest in the world, we have ten furnaces and only two of them have Hartford equipment, and at our Huntington plant there are only two out of five, and at Streator there is only one out of eleven, so that in six plants a very small proportion of our equipment is Hartford equipment.
Representative REECE. Mr. Chairman, may I ask if the requirements with reference to licensing and royalties have restrained you from using the Hartford equipment in your plants?
Mr. LEVIS. No, sir; we believe our own development is superior to the Hartford's.
Mr. COX. Of course you do have a license under the Hartford?
Mr. LEVIS. We can make anything but we only use it for a few things.
Mr. COX. It is an unrestricted license, but you use it only for a few things. That has always been true?
Mr. LEVIS. It has always been true.
Mr. COX. Does your company own any stock, Mr. Levis, in any other glass producing company?
Mr. LEVIS. No, sir.
Mr. COX. Does it own any stock in companies which use glass containers?
Mr. LEVIS. No, sir. Its only stock investment is the stock investment made about 1932 in the Container Corporation, and some stock in the Pennsylvania Sand Company which was taken in the sale of some sand properties.
Mr. COX. That brings me, really, Mr. Levis, to my next question, which is this: Would you describe your company as an integrated company? Do you own your raw materials, and do you manufacture a great many other things besides containers, which you use in connection with the sale of your materials?
Mr. LEVIS. We tried to do that, but now we manufacture very little of our raw materials. We sold our paper plant and sold our sand operation and received shares. We have jointly with the Libby-Owens-Ford Glass Company a half interest in about 150,000 acres of gas property, leases and in fee, in and around Charleston, West Virginia, which supplies the gas for their plate glass factory at Charleston and our bottle factory at Charleston, and we likewise have gas properties at Clarington, Pennsylvania, which we acquired from the former owners of that company.
OUTPUT OTHER THAN GLASS
Mr. COX. You said a moment ago you made caps now for bottles, and you still make boxes to pack them in?
Mr. LEVIS. Yes, we are probably the largest manufacturer of boxes.
Mr. COX. You not only make them for your own use, but sell them to others?
Mr. LEVIS. Yes.
Mr. COX. But you regard your business as primarily that of manufacturing and selling glass, is that correct?
Mr. LEVIS. Yes a very small proportion of our corrugated manufacture for outside sales.
Senator KING. What do you mean"corrugated"?
Mr. LEVIS. Corrugated packages for the packaging of our glass containers.
MR . LEVIS' CAREER
Mr. COX. Mr. Levis, I would like to have you tell us a little about your personal history in the glass business. You began with the Illinois Glass Company, didn't you? Is that your first connection?
Mr. LEVIS. Yes.
Mr. COX. How long were you with the Illinois Glass Company when it existed as a glass producing company?
Mr. LEVIS. Well, I guess I was always with them. My grandfather started it seventy years ago. My family were always in it, and I started to work when I finished school in 1913, and I was president of the company a short time after I came out of the Army.
Mr. COX. About 1920?
Mr. LEVIS. I guess 1922.
Mr. COX. From that point on you were president of the company, and that was a manufacturing company?
Mr. LEVIS. Solely manufacturing and selling.
Mr. COX. And solely glass containers?
Mr. LEVIS. No, it sold everything, but we used to say from the formula to the sales; we sold labels and cartons and everything except what the user of the bottle put in it.
Mr. COX. You didn't make or sell any glass making machinery?
Mr. LEVIS. No, sir. We licensed machines from others.
HARTFORD-EMPIRE MERGER
Mr. COX. You were a licensee at one time both of the old Owens Bottle Company and of Hartford-Empire?
Mr. LEVIS. We were one of the original licensees of Owens, and in 1919 we took a Hartford license.
Mr. COX. That company was merged in 1929 with the Owens Bottle Company, is that correct?
Mr. LEVIS. Well, its assets were acquired by the Owens Company.
Mr. COX. It continued to exist after that for some time?
Mr. LEVIS. Yes.
Mr. COX. What function would you say it served after that?
Mr. LEVIS. It was more or less an investment trust, or first holding company, that had investments in the glass industry, in the business of customers.
Mr. COX. Was the stock of the Illinois Glass Company widely or closely held?
Mr. LEVIS. There were 135 stock holders. They were practically all members of my family or employees of the company.
Mr. COX. I see. Would you object if from time to time in the course of my examination I should refer to that group as the Levis group?
Mr. LEVIS. No, sir.
Mr. COX. It may make it easier for both of us if we treat it that way? That company, as you said, continued as a sort of investment trust until a rather recent period, two or three years ago.
MR. LEVIS. No, in August of this year the directors submitted to the shareholders a plan of liquidation. The liquidation took place in September.
MR. COX. And the company has been dissolved?
MR. LEVIS. Liquidated in kind. All of the stock distributed to the stockholders in kind. That is the Illinois Glass Company, which sold its assets to Owens and became Owens-Illinois.
MR. COX. So that the business which was formerly carried on in the manufacture of glass, the business of the Illinois Glass Company, from 1929 on, has been carried on by Owens-Illinois, is that it?
MR. LEVIS. Yes. As I always thought of it, we sold our brick and mortar and inventory and accounts receivable for securities in another company. Instead of having those, we owned securities in the company that had them.
OWENS-ILLINOIS CO.
MR. COX. What position did you first occupy in Owens-Illinois?
MR . LEVIS. I was Vice President and General Manager from April. Their share-holders' meeting I think was about the 21st of April, 1929, in which their share-holders ratified the purchase, and then in January, between the 10th and 15th, I was elected President.
MR. COX. You said a moment ago that the stockholdings which were held by the Illinois Glass Company included stocks in other glass-producing companies. Did I understand you correctly?
Mr. LEVIS. And in various businesses that we were familiar with and thought would be good investments.
Mr. COX. And those securities have now, you said, been distributed in kind to the stockholders, and are largely held by what we called a moment ago the Levis group?
Mr. LEVIS. Yes.
Mr. COX. Would you tell us one or two of the glass producing companies in which the Levis group now has stockholders?
Mr. LEVIS. They owned shares in the Owens-Illinois Glass Company, the Hazel-Atlas Glass Company, the Anchor Hocking Glass Corporation, the Thatcher Manufacturing Company, and the Kimble Glass Company.
Mr. COX. What is the Kimble Glass Company, Mr. Levis?
Mr. LEVIS. The Kimble Glass Company is a small company in New Jersey who manufacture lime glass tubing and cane and rod for Bureau of Standards specification apparatus, for homeopathic vials, towel bars and various items of that kind.
OUTSIDE GLASS STOCK
Mr. COX. There was no stock in Hartford-Empire Company owned by the Illinois Glass Company?
Mr. LEVIS. At no time, so far as I can recall, was anyone associated with the Owens-Illinois Company in any principal capacity, nor were the Illinois Company ever shareholders in Hartford.
Mr. COX. You would make the same statement with respect to each member of the group you talked about as the Levis group.
Mr. LEVIS. I wouldn't know the minor people but I know my uncles and fathers had no stock.
Mr. COX. The immediate family had no stock.
Mr. LEVIS. That is right.
Mr. COX. Would both of those answers apply so far as any stockholdings in the Corning Glass Works is concerned?
Mr. LEVIS. Yes, sir.
KIMBLE GLASS CO.
Mr. COX. Can you tell us how much of the outstanding stock of the Kimble Glass Company the Levis group holds?
Mr. LEVIS. About 62 per cent.
Mr. COX. Do you know whether the Kimble Glass Company owns any stock in the Corning Glass Works?
Mr. LEVIS. I know they don't own any stock in any company other than one small subsidiary. I think they did have at one time some other stocks but they have none now.
Mr. COX. You don't think at that time they had any stock in Corning Glass Works?
Mr. LEVIS. I know they never owned any in Corning.
Mr. COX. Or Hartford?
Mr. LEVIS. That is right.
THATCHER MFG. COMPANY
Mr. COX. Now take the Thatcher Manufacturing Corporation, that is a company engaged in manufacturing glass containers, largely milk bottles, isn't it?
Mr. LEVIS. Yes, and they are a subsidiary of the Olean Glass Company which manufactures a general line.
Mr. COX. Could you tell us what per-centage of the outstanding stock of that company the Levis group owned?
Mr. LEVIS. They owned less than 10 per cent.
Mr. COX. Can you give us a limit in the other direction, too?
Mr. LEVIS. They owned 10,000 shares of the stock at the maximum, and certain individuals owned shares personally. I explained to the S. E. C. in detail, gave them a lengthy report on the whole transaction, and they ruled it was less than 10 per cent even though they knew of the Kimble interests?
Mr. COX. When you add the Kimble interests, is it more than 10 per cent?
Mr. LEVIS. There is no title to it so far as the same people were concerned. Remotely, we might have gathered everybody together.
Mr. COX. You mean the only chain there was the fact that one and the same group owned 60 per cent of the Kimble and Kimble owned a small per cent?
Mr. LEVIS. No, a corporation in which certain individuals are interested own 60 per cent of Kimble.
Mr.COX. And Kimble owned a certain percentage of Thatcher?
Mr. LEVIS. Yes.
Mr. COX. Does the Levis group now have a representative on the board of directors of the Thatcher Company?
Mr. LEVIS. We never had a representative except in so far as Mr. William Mandeville who was on the board might have been considered our representative.
Mr. COX. That is what I was going to ask you about, Mr. Levis. I am going to show you a letter which was written by you to Mr. R. H. Levis, dated July 25 ,and I call your attention to the last paragraph there. Will you have a look at that?
Mr. LEVIS. Yes, sir.
Mr. COX. Will you tell us just to what extent, to what degree Mr. William Mandeville was a representative of the Levis group?
Mr. LEVIS. I know he was a young lawyer in Elmira and he has been a friend of mine for a good many years. One of their older directors died and they wanted to select someone and we among us had a large block of shares and they asked our opinion and we thought he would be fine.
Mr. COX. Do you regard him as representing your interest at all?
Mr. LEVIS. We have never regarded anyone as representing our interest in anything, sir.
Mr. COX. I was rather puzzled by this expression you used in the letter, in which you say, "Mr. William Mandeville is going on the Thatcher Board and I have expressed the desire that he represent our stock interest on the board and keep in contact with us regarding the situation which he has in mind."
Mr. LEVIS. More than the majority of the shareholders of Owens have expressed that same desire to me and I don't think I am their representative.
Mr. COX. I want to be sure I understand that, Mr. Levis. You don't mean the that Mr. William Mandeville was representative of the Owens Company on the Thatcher Board.
Mr. LEVIS. No sir, the Owens Company had no interest in it.
Mr. COX. So far as he represented anyone, it was just a friendly interest on your part, is that correct?
Mr. LEVIS. Yes, sir. He could have been put on without that condition, and we couldn't have him put on. That is a letter to my uncle who has been a great pal of mine for a great many years.
Mr. COX. I want you to explain what the situation is. Did he keep in contact with you regarding the situation?
Mr. LEVIS. He wrote me from time to time, giving me facts.
Mr. COX. Is Thatcher Manufacturing Company a competitor of yours at all?
Mr. LEVIS. In milk bottles and in general lines through Olean, yes.
Mr. COX. You sell milk bottles in the same market, in the same general territory?
Mr. LEVIS. Yes, sir, we sell a good many to the same customers.
Mr. COX. Whatever the relationship was between you and Mr. Mandeville — and I will attempt to permit you to describe it do you think that relationship had any effect upon the competitive practices between the two companies?
Mr. LEVIS. I know it didn't.
Mr. COX. You think it made no difference?
Mr. LEVIS. No.
Mr. COX. You still competed just a shard as you would have if he hadn't been on the board?
Mr. LEVIS. Yes.
Mr. Cox. When he kept in contact with you regarding a situation, did that contact ever involve reporting as to practices and policies with respect to sale of containers?
Mr. LEVIS. It didn't influence it, sir. I mean my relationship with Mr. Mandeville would have been just as pleasant had I not been a shareholder, as being one.
Mr. COX. You and everyone in the glass business, manufacturing glass containers, are rather friendly, is that it?
Mr. LEVIS. They have always been nice to me.
Mr. COX. You have all grown up together, haven't you?
Mr. LEVIS. I don't know hardly any-one in the industry whom I haven't known for at least three generations.
OTHER DIRECTORSHIPS
Mr. COX. Could you tell us now what directorships you hold in other companies besides Owens-Illinois?
Mr. LEVIS. I am a director of National Distillers and of the W. & A. Gilbey & Company, Ltd., which is the Gilbey American company; of the Weco Products Company, which manufactures and sells Dr. West tooth brushes, powder puffs, handkerchiefs and items of that kind; the Kimble Glass Company; the Owens-Illinois Company; the Owens Staple-Tied Brush Company.
Mr. COX. Were you ever a director of Hazel-Atlas?
Mr. LEVIS. Yes.
Mr. COX. When did you resign?
Mr. LEVIS. It must have been in the spring of 1934. When I filled out this paper, sir, it shows that I was a director in '33 and was not a director in '36. As near as I can determine from asking the Hazel people, I must have been on about a year, from the fall of 1933 until the fall of 1934.
Mr. COX . If I should suggest to you it was about sometime in the spring of 1935 that you resigned, would that refresh your recollection?
Mr. LEVIS. I wasn't on in '36 and I was on in '33 when I prepared this schedule.
Mr. COX. Of course Hazel-Atlas is a competitor of yours, isn't it? Mr. LEVIS. Oh, Owens, not mine. Mr. COX. Can you tell us why you resigned from the board of Hazel-Atlas? Was there any particular set of circumstances?
Mr. LEVIS. I don't know. I went on the board because the Illinois Glass Company made a large investment in the company and I thought I could contribute something in help and I figured that I had contributed that and I resigned.
Mr. COX. Does the Owens-Illinois Company or the Levis group, either one, now have a representative on the board of Hazel-Atlas?
Mr. LEVIS. No, only about in so far as William Mandeville might figure that he represents our interests. I have always voted the Illinois interest for Mr. Quay.
Mr. COX. I am going to hand you a letter now dated April 1, 1935, another letter which you wrote to your uncle, and I call your attention to the last paragraph in that letter and ask you if it refreshes your recollection.
Mr. LEVIS. It does. I didn't recall it until I saw this.
Mr. COX. In the last paragraph of this letter you say, "Because of the recent publicity given Owens-Illinois and our investment in Hazel-Atlas in a letter read into the Congressional Record of March 8th by Mr. Borah, I advised Mr. McNash that it would probably be desirable for me to resign as a member of their board at either their April meeting or their July meeting, and we discussed the advisability of having Mr. George Quay, Secretary of the Company, elected in my place, with the understanding that he would be representing us and that I would receive through him the same type of information I now receive as a Director. I will see you in the meantime and we will have a chance to discuss just what should be done in this connection."
Would it be correct for me to suggest, Mr. Levis, that Mr. Quay, after you resigned, then went on the board as a representative of the Owens-Illinois Company or the Levis group?
Mr. LEVIS. No, sir, he was elected to the board by the other directors, and then at a subsequent shareholders' meeting was elected by them. My proxy for the shares we had were sent to Mr. Quay. He either had the right to use it or not. That was optional with him.
Mr. COX. You don't regard him as representing your interests on the board?
Mr. LEVIS. No more than I think I represent the Libby estate interests, and you think I am all right.
Mr. COX. You suggest that this choice of language in the letter is perhaps a little unfortunate, Mr. Levis. You didn't really mean that.
Mr. LEVIS. I didn't realize then that my letters I wrote to my uncle were not my uncle's and my private property.
Mr. COX. Well, now, I will ask you this question, which is a similar question to the one I asked you about Thatcher a moment ago. Do you think whatever the relationship is between you or your company, or the Levis group, and Mr. Quay, that that relationship has affected in any way the competitive practices which the two companies have followed?
Mr. LEVIS. No, sir.
Mr. COX. You think that they have competed just as if that relationship didn't exist?
Mr. LEVIS. Mr. McNash wouldn't give me credit on that kind of a basis.
Mr. COX . I would like to have this letter marked and admitted.
(The letter dated April 1, 1935, to R. H. Levis, was received in evidence, marked "Exhibit No. 126" and is included in the appendix on Page 252.)
Senator KING. By that you mean there has been competition between the two companies?
Mr. LEVIS. Always.
The CHAIRMAN. Without objection this letter may be marked and admitted as an exhibit.
Mr. LEVIS. Do you mean without objection that I don't object to its being admitted?
The CHAIRMAN. I mean on the part of the members of the committee do you wish to offer an objection?
Mr. LEVIS. I do object to it being admitted. It is a personal letter to my uncle and isn't a business document of any kind.
The CHAIRMAN. You just testified with respect to it.
Mr. LEVIS. That I wrote it, yes.
The CHAIRMAN. You acknowledged it.
Mr. LEVIS. Yes.
The CHAIRMAN. And it was read into the record at that time.
Mr. LEVIS. You can treat it as you want to, sir, but I don't like to see it admitted. I don't think it has anything to do with the Temporary National Economic Committee.
Mr. COX. Perhaps, Mr. Levis — I want you to understand what we are trying to do here, at least what the Department is trying to do, so you won't think we are taking unfair advantage of you.
We went into this and your stock-holdings in other glass companies and your directorships in other glass companies in relation to this patent problem merely because it has been our experience in enforcing the antitrust laws that one of the most difficult and at the same time nebulous problems we have is the effect on competitive conditions of that kind of interlocking relationship.
Now I have no desire, I am sure you don't, to argue out this afternoon the implications of those interlocking relationships, but we want to put this letter in the record, and the other material in the record, with respect to that kind of siuation [sic] situation so that the committee, and the Department, for the purpose of whatever conclusions either the Department or the committee wishes to draw, will be in a position to see what the situation is in the industry with respect to those relationships. I want to make that perfectly clear to the witness.
The CHAIRMAN. I think that is clear to the witness. It certainly is to the committee.
Mr. LEVIS. Yes. My only theory is that he has something over 8,000 of my letters, and this one is quite remote and not to the point, and many of the other ones which are to the point that would be helpful would never occur.
Mr. COX. I will make an offer to you. If you will select some of those you would like to have me put in. I will, without giving you a blanket guarantee, seriously consider putting them in for you.
I would like to ask you one or two more questions about this, Mr. Levis, because I think it has some importance. Why did you feel that that criticism was of sufficient force that you should withdraw from the board of Hazel-Atlas? Let me start with this question. You, I assume, were perfectly assured in your own mind when you were on the board that that relationship didn't violate the anti-trust laws and had no effect on competitive practices. Wouldn't that be an accurate statement?
Mr. LEVIS. I felt that way or I wouldn't have gone on.
MR. COX. Then why did you feel, in view of the criticism, that you should withdraw?
MR. LEVIS. Because I couldn't find out who wrote the Senator. I had every member of the glass-container industry sign a petition voluntarily at a meeting, saying that they didn't write it and they weren't in sympathy with what was said, and at the same time we were members of the Code Authority under the N. R. A. Code. We resigned from that and from officer-ship of the association because we thought that if anonymous letters were read into the Record and no one could find out who wrote them, that we had better pull into our shell.
Mr. COX. You felt perhaps that your company was frequently subject to that kind of criticism?
Mr. LEVIS. Yes, we were a publicly-owned company, and I had committed some act which met with some disrepute which I didn't presume was entitled to that criticism.
HARTFORD-EMPIRE CONTRACT
Mr. COX. I think that clears up what I wanted to ask you about. I want to ask you some questions now about the con-tract between your company and the Hartford-Empire Company-I say your company; I mean the Owens Illinois Company — that was made in 1924. You know the contract I am speaking of, I assume.
Mr. LEVIS. No, I know of it but I wasn't in the company when the contract was made. Mr. COX. Were you, as an official of the Illinois Glass Company, at all familiar with the negotiations which preceded that contract?
Mr. LEVIS. Yes, we had presumed that we had rights under Hartford's patent, if acquired by Owens, and we were also a licensee of Hartford and in exchange for revision of our Hartford license we waived any rights that we had and became licensees of both companies.
Mr. COX. Can you recollect now, Mr. Levis, what the attitude of your company was at that time-the Illinois Glass Company I am speaking of now — with respect to this proposed contract between Hartford and the Owens Bottle Company?
Mr. LEVIS. I don't know that I could. If you have anything that would refresh my recollection, I might.
Mr. COX. I will read something to you which was not a statement which you made but a statement which was made by Mr. Ashcraft who, I understand, was at that time representing the Illinois Glass Company, is that right?
Mr. LEVIS. He was the counsel and a director.
Mr. COX. I will now read to you a statement contained in a letter written by Mr. V. M. Dorsey to Mr. Alexander D. Falk, at Corning Glass Works, dated Nov. 5, 1921, which purports to report something that Mr. Ashcraft said, and I just ask you whether it refreshes your recollection. This statement is —
"At a recent conference with Owens, Mr. Ashcraft of the Illinois Company, who is a licensee under the Owens Company for certain rights, and under the Hartford Company for other rights, vigorously put up to Owens the necessity of closing out these pirates, and that this could probably only and certainly be best done by a co-operation with the Hartford-Fairmont Company, the appeal being made to the Owens Company in the capacity of manufacture of glass ware and as manufacturers of machines."
I think I started to read the quotation a little too early in the paragraph. I am going to read the first sentence in the paragraph to you now, and then I will give it to you to look at. The first sentence reads:
"The Illinois Company, as manufacturers of glass ware, are disturbed at the market conditions created by the fact that a number of irresponsible manufacturers have installed the pirate machine, namely, Howard Miller, etc."
Then the paragraph proceeds as I previously read it. Will you look at that?
Mr. LEVIS. I was operating the factory in Alton in 1921.
Mr. COX. It doesn't refresh your recollection?
Mr. LEVIS. It wasn't until 1924 that I had anything to do with the patent situation. Mr. Ashcraft handled it prior to that time, with one of my uncles who since died.
Mr. COX. Did you prior to that time have anything to do with competitive conditions in the industry?
Mr. LEVIS. Only to make better bottles and more of them.
Mr. COX . You didn't have anything to do with the marketing end of it?
Mr. LEVIS. No, sir, I was an operating man.
Mr. COX. You were engaged just in manufacturing containers?
Mr. LEVIS. That's right .Mr. COX. And this doesn't refresh your recollection at all as to the circumstances?
LICENSE VS. PATENT
Mr. LEVIS. I might say by way of passing that the Illinois Company's policy, always was to take a license under any patent that anybody thought they had, on the theory that it was cheaper to do that than it was to spend the time necessary to fool with the patent situation. We always prided ourselves that we had never paid a patent lawyer a dollar in the seventy years of existence. We paid the fee as our contribution to the fellow who worked on that end of it. We made products and sold them. We weren't interested in patents. That was my bringing up.
Mr. COX. So you were engaged in manufacturing at that time under licenses which you took from other people?
Mr. LEVIS. It didn't make any difference who it was, if he said he had one we didn't even read it. We just sign it and pay it.
Mr. COX. Do you recall whether, in the light of what I read to you, your company was ever disturbed by the fact that while it was paying under these licenses which they sometimes didn't even read, there were other manufacturers in the field who were using other machinery and not paying any other royalties?
Mr. LEVIS. We always complained about that, like we did about local taxes and anything else we didn't like.
Mr. COX. You didn't like that kind of competition?
Mr. LEVIS. No.
Mr. COX. In other words, if you were going to pay royalties , you wanted every-body else to pay royalties.
Mr. LEVIS. Or else tell us the patents weren't any good and quit talking about it.
Mr. COX. But you wanted to be able to compete with those people on an even basis?
Mr. LEVIS. Yes, sir, except those who licensed like Owens, who spend money to develop.
Mr. COX. But so far as other manufacturers were concerned, who weren't development concerns, you didn't want them manufacturing and selling bottles and not paying a royalty fee for the machinery while you were doing that?
Mr. LEVIS. More or less the other way around. We didn't want Hartford to collect a fee from us and not collect it from someone else if their patent was any good.
"PIRATE" MACHINES
Mr. COX. And of course as to these pirate feeders, the pirate machines referred to in the letter, they were machines which people were using without the permission of Hartford-Empire or of Owens.
Mr. LEVIS. I think Hartford had a patent structure they were trying to develop there. There was a lot of development in the art and it took a lot of litigation in the Patent Office to perfect it. We wanted that hurried. We either stopped paying and everybody did or we paid and everybody else did.
Mr. COX. You wanted it hurried so you wouldn't have to continue to compete with people manufacturing on what those people called the pirate machine?
Mr. LEVIS. I don't think that was the point. The point was, we didn't want to pay because the patent was good, and have another man not pay if it was good. We didn't care what the other fellow did, because when we took the license under Owens and Hartford we knew that they were more economical devices than the pirate devices, or else we would have taken a pirate device. We had the option of doing either, and we sought to take what we thought was best, and theirs was in our opinion better.
SPIRIT OF EQUITY
Mr. COX. I want to be sure I understand you about that. Your feeling was rather a feeling that in fair play and equity you should be treated the same as anybody else by Hartford-Empire, rather than a feeling that the payment of royalties by you, when you were competing with someone who didn't pay royalties, subjected you to a competitive disadvantage?
Mr. LEVIS. I don't think the competitive disadvantage was there.
Mr. COX. You don't think that had any part in the picture at all?
Mr. LEVIS. The other device was sufficiently inefficient that we always believed you could pay the royalty and have the efficient device and still have lower costs than if you used the pirate device.
Mr. COX. So you weren't objecting to the pirate device?
Mr. LEVIS. We were interested in manufacturing under the patent.
Mr. COX. That has been the attitude not only of the Ilinois [sic] Illinois Glass Company but also of Owens-Illinois?
Mr. LEVIS . I inherited a situation when I went into Owens-Illinois, but my general thinking on it hasn't been very different.
Mr. COX. Do you feel that you are sufficiently familiar with the general provisions of that '24 contract so that you can discuss them in a general way? It was in existence when you came in Owens-Illinois in '29, was it not?
Mr. LEVIS. I am not familiar with it. I would much prefer that Mr. Williams or Mr. Belknap talk on it, because they had all to do with it.
Mr. COX. There are two or three questions about the policy that I want to ask you in the light of the provisions of that agreement, and I wonder if you know enough about the provisions of the agreement so that I can ask the questions. I will try with some questions and if you don't know you must tell me, and I will try with someone else.
Under that agreement, Owens and certain subsidiaries gave to Hartford-Empire an exclusive, divisible, assignable license under patent rights for feeding glass I which didn't relate to the suction method. Would you agree with that?
Mr. LEVIS. I couldn't give you the theory of that accurately, Mr. Cox. There were some situations in there.
All I know is that when I came into the picture in '29 there was so much time consumed in conferring on these kinds of things and so little time consumed in really running the business that I did, over a period of four or five years, the best I could to get shed of all this patent stuff, to get down to making bottles and selling them.
Mr. COX. You found if you would, you could spend all your time on it.
Mr. LEVIS. And that, after having Owens lose money. We took in a lot of royalty; a lot of it came from themselves, a lot of it they paid out, and when they got all through our schedule showed we took in $12,000,000 from outsiders in eighteen years, and paid out $5,000,00 in seventeen years, and we had about $7,000,000 left, and our development expense in that same period was $7,400,000, so we were out $400,000 for fooling with it. I couldn't see that there was anything in that and when we stopped it in 1935 and sold our our whole interest — true, the prohibition amendment had something to do with our success — we did better than we ever did.
Mr. COX. You made more money after that contract was terminated?
Mr. LEVIS. Yes, we knew how to do that. We didn't know how to do patent things.
Mr. COX. You wouldn't suggest that the net result of that contract which Hartford-Empire made in 1924 was that your company lost money, would you?
Mr. LEVIS. Well —
Mr. COX (interposing). I think we are talking about different things. You are talking about the whole of your patent activities. I am talking about the contract, considered apart from the rest of your patent activities.
Mr. LEVIS. I don't believe I have compiled that figure, but in 1931 I recall the first interest I had in the matter was to address a letter to Hartford waiving any right that Owens might have had to have restricted their licensees, which I had been informed had never been exercised; and in 1932 in a desire to get out of this situation and to clean up all that was behind it, we entered into an amendment agreement in which we gave up a sixth of the income from any patents that might have related to the 1924 agreement, and as quickly after that as it could be arranged, which was in 1935, we sold all of our interest in the situation and we tried to carry our policy which, despite what the memoranda we might have written ourselves and the discussions we might have had, we felt that a patent is not a grant of right to use the thing; it is only a grant to exclude other people from using the same thing. And we have today 536 patents just so that we won't be excluded from doing something that somebody else has a patent on.
Mr. COX. That is very interesting, Mr. Levis. In other words, as far as you are concerned, the only significance of the patent is it is a thing someone else may get and prevent you from doing something you may wish to do in connection with your manufacture.
Mr. LEVIS. If we want to go in and build suction machines and put any kind of gadget on them, we want to do it without, reading a pile of patent papers to find out whether or not we can do it.
Mr. COX. Would it be accurate to say you are not interested in keeping others from using them; you are just interested in using them in your own manufacture of glass?
Mr. LEVIS. That is an accurate statement of how I feel. I don't know what I might have said as trading talk on it.
Mr. COX. I was just trying to develop the attitude you expressed a moment ago. Mr. Chairman, I am about to go into this 1924 contract. It is a matter which will probably take a half an hour or so. I am prepared to go along as the Committee wishes, but if you wish to arise at the usual time, this would be a convenient break.
The CHAIRMAN. The members of the Committee have a few other duties to perform, and if there is no objections on the part of any member of the Committee, if no other questions are to be asked at the moment, we will recess until tomorrow morning at 10:30 o'clock.
(Whereupon , at 4 p.m., a recess was taken until Wednesday, December 14, 1938, at 10:30 a. m.)
APPENDIX
(Exhibit No. 126)
(Introduced in evidence, Page 250,
Verbatim Record)
LETTER DATED APRIL 1, 1935,
FROM FILES OF FORMER
ILLINOIS GLASS COMPANY,
ALTON, ILL., ADDRESSED TO
MR. R. H. LEVIS OF THAT
COMPANY AND SIGNED BY
W. E. LEVIS.
Mr. R. H. Levis, Illinois Glass Company, Alton, Illinois.
Dear Uncle Harry:
I attended the regular meeting of the Board of Directors of the Hazel-Atlas Glass Company in Wheeling on Tuesday of last week, which meeting followed their annual stockholders' meeting that was held in the afternoon of the same day. There were very few stockholders present. The meeting was well conducted and all features that required any explanation were explained fully. The existing Board of Directors was reelected. Immediately following the stockholders' meeting there was an organization meeting of the new Board and the old officers were re-elected, except that Mr. McNash was also elected Chairman of the Board, as their by-laws require a Chairman of the Board as well as a President.
Their capital expenditures, being particularly large at Clarksburg for equipping an additional furnace, were likewise approved, and the condition of their business and their earnings were discussed at length. They earned for the month of February $144,851.17, as compared with $222,240 for the same month last year. The difference in the earnings was largely accounted for by the decline in shipment of fruit jars and fruit jar caps during the early months of this year. I am satisfied that their prospects for the next few months are such that they will comfortably earn their dividend requirements. Their cash position is good, as usual, with a total of cash and securities of $6,845,475 after deducting a reserve to bring the securities slightly below their present market value.
Because of the recent publicity given Owens-Illinois and our investment in Hazel-Atlas in a letter read into the Congressional Record of March 8th by Mr. Borah, I advised Mr. McNash that it would probably be desirable for me to resign as a member of their Board at either their April meeting or their July meeting, and we discussed the advisability of having Mr. George Quay, Secretary of the Company, elected in my place, with the understanding that he would be representing us and that I would receive through him the same type of information I now receive as a Director. I will see you in the meantime and we will have a chance to discuss just what should be done in this connection.
Sincerely,
W. E. LEVIS (SIGNED) WILLIAM.
April 1, 1935.
